Planning and Budgeting

The relationship between trade and development has long been of interest to economists, but studies in this field mainly used per capita income as an indicator of development, and so other aspects of development and quality of life were neglected. This article investigates the relationship between trade and development, using the panel data of 104 countries over the 1994 -2010 period. We use three indices of development: per capita income, human development index (HDI) and index of human progress (IHP). Each of these three indicators have been estimated in a separate model. The rate of growth of development index is assumed to be a function of the rate of growth of per capita trade, its lagged values, and other explanatory variables. The empirical results confirm the positive direct impact of trade on development in each regression. The lag structure of the impact of trade on development was different for these indices. According to the study, although the immediate effects of trade on income per capita are larger, but the positive effects of trade on the indicators with more dimensions of development, lasts longer.