Trade and Economic Growth - Is trade with large trading partners beneficial for growth?

Abstract: Trade and economic growth have boomed over the latest centuries, and trade has for long been seen as an engine of economic growth. Research over the years has been consistent of the fact that there is a relationship between the two but it has not been established how this relationship works. This study contributes to earlier research by examining whether it is beneficial for domestic economic growth to trade with larger trading partners. In order to examine this we use a Solow-type model on a sample consisting of 34 OECD countries during the time period 1995-2012. Besides confirming the convergence hypothesis and somewhat a positive relationship between trade and growth the results show some signs of trade with larger economies having a positive impact on growth. However, more research is needed on this topic before we can conclude a statistically significant relationship.