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.
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Paper provided by Centre for the Study of African Economies, University of Oxford in its series Working Papers Series with number
2001-10.
Length: 28 pages Date of creation: 2001 Date of revision: Handle: RePEc:fth:oxesaf:2001-10
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Find related papers by JEL classification: F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies O11 - Economic Development, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
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