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May 30, 2020

visualisation of global trade ,economic activity vs gdp growth



 
In today’s global economic system, countries exchange not only final products, but also intermediate inputs. This creates an intricate network of economic interactions that cover the whole world. Over the last couple of centuries the world economy has experienced sustained positive economic growth, and over the same period, this process of economic growth has been accompanied by even faster growth in global trade. In a similar way, if we look at country-level data from the last half century we find that there is also a correlation between economic growth and trade: countries with higher rates of GDP growth also tend to have higher rates of growth in trade as a share of output. This basic correlation is shown in the chart here, where we plot average annual change in real GDP per capita, against growth in trade (average annual change in value of exports as a share of GDP).1 Is this statistical association between economic output and trade causal? Among the potential growth-enhancing factors that may come from greater global economic integration are: Competition (firms that fail to adopt new technologies and cut costs are more likely to fail and to be replaced by more dynamic firms); Economies of scale (firms that can export to the world face larger demand, and under the right conditions, they can operate at larger scales where the price per unit of product is lower); Learning and innovation (firms that trade gain more experience and exposure to develop and adopt technologies and industry standards from foreign competitors)


Over the last couple of centuries the world economy has experienced sustained positive economic growth, and over the same period, this process of economic growth has been accompanied by even faster growth in global trade. In a similar way, if we look at country-level data from the last half century we find that there is also a correlation between economic growth and trade: countries with higher rates of GDP growth also tend to have higher rates of growth in trade as a share of output. This basic correlation is shown in the chart here, where we plot average annual change in real GDP per capita, against growth in trade (average annual change in value of exports as a share of GDP).