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In this paper we show that the existing low estimates of the cost of protection have failed to consider altogether or inappropriately the effects on the cost of protection of economic growth and the historic expansion of world trade at a rate greater than real output. We argue that if such growth is incorporated into models of the cost of protection, the net present value of costs readily becomes very large. The paper follows the basic approach used by M. Feldstein [1979], who showed that in a growing world the welfare cost of any steady rate of inflation approaches infinity as long as the rate of economic growth exceeds the discount rate.
We review the traditional estimates of the cost of protection. They are shown to provide extremely low estimates in a static analytical framework. We then argue that the cost of protection grows at the rate at which international trade expands because it prevents exploitation of the opportunity for gains from trade growing at that rate. In the post-war years trade has grown much more rapidly than real output. The growth-rate is also much greater than any of the commonly used rates of social discount. It therefore follows that the present value of the cost of protection is very large. Precise estimates depend on the length of protection and the size of any social benefits it provides. While no empirical estimates are presented, the analytical approach suggests a way for resolving what many economists perceive to be the puzzle of existing estimates of extremely low costs of protection. [ABSTRACT FROM AUTHOR]

Recent years have seen a significant focus in the literature on growth and development on the idea that legal and political institutions are the key determinant of economic development. The main finding of this paper is that the focus on the primacy of legal and political institutions may be misplaced and that business-friendly economic policies (proxied for here by the World Bank's Doing Business indicator) are the key determinant of the level of income per capita. We find that a country's Doing Business rank dominates a range of measures of legal and political institutional quality as an explanatory variable for income per capita. We also find the Doing Business rank to be a key explanatory variable for economic growth and that previous findings assigning a significant role to educational attainment are not robust to the inclusion of this new indicator in growth regressions. [ABSTRACT FROM AUTHOR]

The paper explores the relationship between FDI and economic growth in eight transition countries - EU candidates - in the period 1994-2001. Surprisingly, statistically robust negative causal relationship between FDI and growth emerged implying that FDI hampered their real convergence with EU. This result can be explained by the form of FDI. In the observed period, acquisitions were the predominant form and the proceeds of the sales were spent on consumption and imports rather than enhancing productive assets. Indeed, current account and FDI were strongly linked; the bigger the inflow of FDI into a country, the higher its current account deficit and foreign debt. Small size of the host countries and concentration of FDI in trade and finance could weaken productivity spillovers while increased efficiency of the acquired firm could be more than offset by the reduction of economic links with local firms. FDI would also not automatically increase competition as it could force small emerging local competitors out of business. While foreign trade increased through FDI, multinationals contributed more to imports than to exports. Finally, while FDI might support human capital formation, this type of spillovers simply does not seem to be very relevant. [ABSTRACT FROM AUTHOR]