Once Again, Trade Openness and Growth: Are Trade in Value Added Concepts Different?

Halit Yanıkkaya and Abdullah Altun

No 2018-01, Working Papers from Gebze Technical University, Department of Economics

Abstract: This study compares the impacts of gross trade openness measures with trade openness in value added measures on economic growth for the years 1995-2014 by employing a dynamic panel data estimation. Our findings suggest that although gross trade shares promote growth, the estimated coefficient on trade shares in value added indicates the much more significant and larger effect on growth. Compared to gross terms, they also imply that while exports in value added terms have much larger growth effect, imports in value added terms have no impact on growth. We then evaluate the impacts of various trade policies on growth in terms of gross trade and trade in value added separately. Although our results imply the negative growth effects of gross import tariffs, tariffs in value added terms do not have any impact on growth. Overall our results imply that the growth effects of trade openness based on traditional gross figures considerably differs from those for trade openness based on value added terms. These results reaffirm that trade protectionism is essentially going to lower growth because exports shares regardless of their measurements and disaggregation levels promote growth.

Keywords: growth; gross trade shares; trade in value added; trade policy (search for similar items in EconPapers)
JEL-codes: F14 O24 (search for similar items in EconPapers)
Pages: 19 pages
Date: 2018-10-09
New Economics Papers: this item is included in nep-int
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