What Does Trade Openness Measure?

Eiji Fujii

No 6656, CESifo Working Paper Series from CESifo

Abstract: An empirical measure of trade openness is defined as the ratio of total trade to GDP, and represents a convenient variable routinely used for cross-country studies on a variety of issues. However, the effects that the crude measure captures remain ambiguous, making it difficult to interpret the empirical results. Drawing on several strands of the literature, this study examines the informational content of the trade openness measure using intranational and international data. We find that, even for fully integrated economies within a country, trade openness is approximately half as variable as it is for segmented diverse countries around the world. The information it conveys is better characterized as the extent of the economic remoteness and idiosyncratic distribution of sectoral production. The cross-country variation of trade openness derives more from the variability in GDP than trade.

Keywords: trade openness; specialization; gravity model; market integration; price deviations; remoteness (search for similar items in EconPapers)
JEL-codes: F14 F40 (search for similar items in EconPapers)
Date: 2017
New Economics Papers: this item is included in nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://www.cesifo.org/DocDL/cesifo1_wp6656.pdf (application/pdf)

Related works:
Journal Article: What Does Trade Openness Measure? (2019)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_6656

Access Statistics for this paper

More papers in CESifo Working Paper Series from CESifo Contact information at EDIRC.
Bibliographic data for series maintained by Klaus Wohlrabe ().