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Trade Openness And Economic Growth Can We Estimate The Precise Effect?

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  • Karras, Georgios

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Abstract

While various theoretical models predict that openness to international trade accelerates productivity and promotes economic growth, the empirical evidence has been mixed or imprecise. This paper investigates the issue using two panel data sets: one of 56 countries covering the period 1951-1998, and another of 105 countries over 1960-1997. The results show that the effect of trade openness on economic growth is positive, permanent, statistically significant, and economically sizable. This effect is robust across the two data sets used and a number of different estimation methods and lag lengths. Specifically, it is shown that increasing trade (exports plus imports) as a fraction of GDP by 10 percentage points, permanently increases the real growth rate of GDP per capita by 0.25 to 0.3 percent.

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Bibliographic Info

Article provided by Euro-American Association of Economic Development in its journal Applied Econometrics and International Development.

Volume (Year): 3 (2003)
Issue (Month): 1 ()
Pages:

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Handle: RePEc:eaa:aeinde:v:3:y:2003:i:3_1

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Cited by:
  1. Muhammad AFZAl, 2012. "Do Structural Transformation And Trade Liberalisation Cause Economic Growth In Pakistan?," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 12(1).
  2. Muhammad, Shahbaz, 2012. "Does Trade Openness Affect Long Run Growth? Cointegration, Causality and Forecast Error Variance Decomposition Tests for Pakistan," MPRA Paper 37391, University Library of Munich, Germany, revised 10 Mar 2012.
  3. Guisan, M.C. & Exposito, P., 2006. "Production by sector in China, India and OECD Countries, 1985-2005," Regional and Sectoral Economic Studies, Euro-American Association of Economic Development, vol. 6(2).
  4. Konya, L., 2004. "Export-Led Growth, Growth-Driven Export, Both or None? Granger Causality Analysis on OECD Countries," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 4(1).
  5. KARRAS, Georgios, 2008. "GROWTH AND CONVERGENCE, 1950-2003. What Can We Learn from the Solow Model?," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 8(1), pages 5-18.
  6. Jaunky, V.C & Khadaroo, A.J., 2008. "Health Care Expenditure And Gdp: An African Perspective," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 8(1), pages 131-146.
  7. Talberth, John & Bohara, Alok K., 2006. "Economic openness and green GDP," Ecological Economics, Elsevier, vol. 58(4), pages 743-758, July.

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