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Date Published:Sep 1, 2002
We derive a general, cross-national measure of trade policy orientations by using fixed country-year effects in a gravity model estimated with data on bilateral trade flows across 82 nations between 1960 and 1992. The approach provides an attractive alternative to existing methods for estimating general levels of trade restrictions for a wide array of nations over a substantial period of time. Existing indicators are either gravely biased or demand immense amounts of detailed data (or both). Our measure is theoretically grounded, easy to calculate with available data, consistent with the accepted contrasts drawn between notoriously closed and open economies in different periods, and it moves closely in line with well-documented policy reforms made recently in a variety of nations. At the same time the measure differs markedly from the most commonly used indexes of trade policy in a variety of important ways and cases, suggesting, for example, that those indexes dramatically overstate the degree of change in U.S. trade policy over the last three decades and the differences between U.S. and Japanese policy openness. Use of the new measure may thus have an important impact on results in several key fields of research—including studies of the effects of trade openness on growth and income inequality, and analyses of the politics of protectionism.