Openness to international trade and economic growth: A cross-country empirical investigation

Bülent Ulaşan

No 2012-25, Economics Discussion Papers from Kiel Institute for the World Economy (IfW Kiel)

Abstract: In this paper, we revisit the empirical evidence on the relationship between trade openness and long-run economic growth over the sample period 1960-2000. In contrast to previous studies focusing mainly on the period 1970-1990, this paper reassesses the openness-growth nexus over a much longer sample period, enabling us to better account both trade policy stance and long-run growth dynamics. We carry out our empirical investigation by employing various openness measures suggested in the literature rather than relying on a few proxy variables. We also construct three additional composite trade policy indexes directly measuring trade policy stance. Our findings indicate that many openness variables are positively and significantly correlated with long-run economic growth. However, in some cases, this result is driven by the presence of a few outlying countries. Adding to the fragility of the openness-growth association, the significance of openness variables disappears once other growth determinants, such as institutions, population heterogeneity, geography and macroeconomic stability are accounted for.

Keywords: Economic Growth; trade openness; outliers; weighted least squares (search for similar items in EconPapers)
JEL-codes: F13 F43 O47 (search for similar items in EconPapers)
Date: 2012
New Economics Papers: this item is included in nep-fdg
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http://www.economics-ejournal.org/economics/discussionpapers/2012-25
https://www.econstor.eu/bitstream/10419/58224/1/716109964.pdf (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifwedp:201225

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