Working Paper No. 10-13

Trade Liberalization, Privatization and Economic Growth
Hang T. Nguyen
November 2010


This paper presents a study of the impact of trade liberalization policy on economic growth with the simultaneous application of privatization policy in 25 transitional countries. The analysis applies two stage least squares to panel data from 1994 to 2006 for these 25 countries. The estimated results provide evidence of a significantly positive effect of both trade liberalization and privatization on economic growth, when controlling for political conflict and macroeconomic stability. This chapter deals with the endogeneity of openness and privatization by using appropriate instrumental variables and test for the validities of instrumental variables.