Factors Affecting Economic Growth in ECO Countries with Emphasis on the Role of Tariffs

Abstract

Achieving a higher rate of economic growth is one of the main goals of each country that policymakers often pay special attention to it. Therefore, investigating the causes of economic growth is important. Import tariffs as one of the most important factors affecting economic growth have been neglected in many previous studies. Therefore, the aim of this study is examining factors affecting economic growth in ECO countries with an emphasis on the role of import tariffs during the period 1996-2014. The results of dynamic panel data using PMG estimator show that the effect of import tariffs on economic growth in the short and long run is negative and significant. In addition, the effect of trade liberalization on economic growth in the short run is positive and significant. Therefore, by reducing import tariffs and moving toward more trade liberalization, economic growth in ECO countries increases. Furthermore, the labor force had a negative effect and human capital had a positive effect on the economic growth. Finally, results showed that physical capital had the most effect on economic growth in this group of countries. Therefore, improving the business environment, encouraging private investment, moving toward more competition in economic activities with trade liberalization, and moving toward more economic transparency are some recommendations of the current study.

Keywords

• economic growth
• trade
• import tariff
• dynamic panel data
• pooled mean group