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Openness and Economic Growth in Pakistan

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Author Info

  • Musleh-Ud Din

    (Pakistan Institute of Development Economics, Islamabad.)

  • Ejaz Ghani

    (Pakistan Institute of Development Economics, Islamabad.)

  • Omer Siddique

    (Pakistan Institute of Development Economics, Islamabad.)

Abstract

Trade and growth theories generally predict a positive relationship between openness to international trade and economic growth. There are a number of channels through which openness is thought to influence economic growth. First, a liberal trade regime enhances efficiency through greater competition and improved resource allocation. Second, greater access to world markets allows economies to overcome size limitations and benefit from economies of scale. Third, imports of capital and intermediate goods can contribute to the growth process by enlarging the productive capacity of the economy. Fourth, trade can lead to productivity gains through international diffusion and adoption of new technologies. Empirical studies on the relationship between openness and economic growth have largely supported the view that openness has a favourable impact on economic growth. It is not surprising, then, that the proposition that more open economies tend to grow faster has gained wide acceptance in academic as well as policy circles. The objective of this paper is to examine the relationship between openness and economic growth in the context of Pakistan’s economy. Section 2 reviews the literature on openness and economic growth. Section 3 provides an overview of trade liberalisation in Pakistan. Data and methodology are described in Section 4, while Section 5 presents the empirical results. Section 6 concludes the discussion.

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Bibliographic Info

Article provided by Pakistan Institute of Development Economics in its journal The Pakistan Development Review.

Volume (Year): 42 (2003)
Issue (Month): 4 ()
Pages: 795-807

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Handle: RePEc:pid:journl:v:42:y:2003:i:4:p:795-807

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References

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  1. Chow, Peter C. Y., 1987. "Causality between export growth and industrial development : Empirial evidence from the NICs," Journal of Development Economics, Elsevier, vol. 26(1), pages 55-63, June.
  2. Zafar Iqbal & Ghulam Mustafa Zahid, 1998. "Macroeconomic Determinants of Economic Growth in Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 37(2), pages 125-148.
  3. Edwards, Sebastian, 1992. "Trade orientation, distortions and growth in developing countries," Journal of Development Economics, Elsevier, vol. 39(1), pages 31-57, July.
  4. Yanikkaya, Halit, 2003. "Trade openness and economic growth: a cross-country empirical investigation," Journal of Development Economics, Elsevier, vol. 72(1), pages 57-89, October.
  5. Michaely, Michael, 1977. "Exports and growth : An empirical investigation," Journal of Development Economics, Elsevier, vol. 4(1), pages 49-53, February.
  6. Paul M. Romer, 1993. "New Goods, Old Theory, and the Welfare Costs of Trade Restrictions," NBER Working Papers 4452, National Bureau of Economic Research, Inc.
  7. Tyler, William G., 1981. "Growth and export expansion in developing countries : Some empirical evidence," Journal of Development Economics, Elsevier, vol. 9(1), pages 121-130, August.
  8. Paul M Romer, 1999. "Increasing Returns and Long-Run Growth," Levine's Working Paper Archive 2232, David K. Levine.
  9. Francisco Rodriguez & Dani Rodrik, 1999. "Trade Policy and Economic Growth: A Skeptic's Guide to Cross-National Evidence," NBER Working Papers 7081, National Bureau of Economic Research, Inc.
  10. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
  11. Elhanan Helpman & David T. Coe, 1993. "International RandD Spillovers," IMF Working Papers 93/84, International Monetary Fund.
  12. Jeffrey D. Sachs & Andrew Warner, 1995. "Economic Reform and the Process of Global Integration," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(1, 25th A), pages 1-118.
  13. repec:umd:umdeco:rodriguez9901 is not listed on IDEAS
  14. Balassa, Bela, 1978. "Exports and economic growth : Further evidence," Journal of Development Economics, Elsevier, vol. 5(2), pages 181-189, June.
  15. David H. Romer & Jeffrey A. Frankel, 1999. "Does Trade Cause Growth?," American Economic Review, American Economic Association, vol. 89(3), pages 379-399, June.
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Citations

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Cited by:
  1. Matthew McCartney, 2011. "Pakistan, Growth, Dependency, and Crisis," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 16(Special E), pages 71-94, September.
  2. Bianka Dettmer, 2012. "Business services outsourcing and economic growth: Evidence from a dynamic panel data approach," Jena Economic Research Papers 2012-049, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
  3. 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.
  4. Aboohamidi, Abbas & Chidmi, Benaissa, 2013. "Female Labor Force Participation in Pakistan and Some MENA Countries," 2013 Annual Meeting, February 2-5, 2013, Orlando, Florida 143097, Southern Agricultural Economics Association.
  5. Muhammad Arshad Khan & Abdul Qayyum, 2006. "Trade Liberalisation, Financial Sector Reforms, and Growth," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 45(4), pages 711-731.
  6. Anupam Das & Biru Paksha Paul, 2011. "Openness and growth in emerging Asian economies: Evidence from GMM estimations of a dynamic panel," Economics Bulletin, AccessEcon, vol. 31(3), pages 2219-2228.
  7. Nasir Iqbal & Musleh ud Din & Ejaz Ghani, 2013. "Fiscal Decentralisation and Economic Growth: Role of Democratic Institutions," PIDE-Working Papers 2013:89, Pakistan Institute of Development Economics.
  8. Muhammad Arshad Khan & Abdul Qayyum, 2007. "Trade Liberalisation, Financial Development and Economic Growth," PIDE-Working Papers 2007:19, Pakistan Institute of Development Economics.

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