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Trade and human capital as determinants of growth

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  • Måns Söderbom
  • Francis Teal

Abstract

Do openness to trade and higher levels of human capital growth promote faster growth? To answer that question we use a panel of countries to investigate the role of human capital and two measures of openness in determining both the level of income and its growth rate. We argue that focusing on the levels of income by estimating a production function will give misleading estimates if there are unobserved differences in the underlying growth of technical efficiency across countries that are correlated with the explanatory variables. Using a growth rate equation, where we allow for country fixed effects and for possible endogeneity of explanatory variables, we show that both measures of openness, one the Sachs-Warner measure which reflects policy, and one from the PENN World Tables, the share of trade in GDP, give similar results. We argue that openness has a highly significant and large effect on the underlying rate of growth of productivity, while human capital does not.

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Bibliographic Info

Paper provided by Centre for the Study of African Economies, University of Oxford in its series CSAE Working Paper Series with number 2001-10.

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Date of creation: 2001
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Handle: RePEc:csa:wpaper:2001-10

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Keywords: Productivity; openness; human capital and growth.;

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Cited by:
  1. Ansgar Belke & Lars Wang, 2005. "The Degree of Openness to Intra-Regional Trade - Towards Value-Added Based Openness Measures," Diskussionspapiere aus dem Institut für Volkswirtschaftslehre der Universität Hohenheim 257/2005, Department of Economics, University of Hohenheim, Germany.
  2. Marcel Fafchamps & Måns Söderbom, 2004. "Wages and Labor Management in African Manufacturing," CSAE Working Paper Series 2004-02, Centre for the Study of African Economies, University of Oxford.
  3. Marcel Fafchamps & Mans Söderbom & Najy Benhassine, 2009. "Wage Gaps and Job Sorting in African Manufacturing," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 18(5), pages 824-868, November.

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