Trade Costs, Market Access and Growth in the Commonwealth

This paper considers how access to international markets affects development and growth, with a particular emphasis on the Commonwealth countries. It shows that countries with low trade costs to large markets have higher levels of gross domestic product (GDP) per capita on average. The relationship is strong and robust, and even extends to areas within the same country. Two implications are explored in detail. First, remote economies such as the Commonwealth’s small island states face a clear disadvantage in achieving sustainable growth. Second, faster growth in economic ‘hubs’ will increase growth in neighbouring countries. By modelling a number of counterfactual scenarios, the paper quantifies the importance of these two results for output and growth.