The question whether international openness causes higher domestic growth has been subject to intense discussions in the empirical growth literature. This paper addresses this issue using the fall of the Berlin wall in 1990 as a natural experiment. We analyze whether the slow-down in convergence in per capita income between East and West Germany since the mid-1990s and the lower international openness of East Germany are linked. We address the endogeneity of openness by adapting the methodology proposed by Frankel and Romer (1999) in a panel framework. We instrument openness with time-invariant exogenous geographic variables and time-varying exogenous policy variables. We also distinguish different channels of integration. Our paper has three main findings. First, geographic variables have a significant impact on regional openness. Second, controlling for geography, East German states are less integrated into international markets along all dimensions of integration considered. Third, the degree of openness for trade has a positive impact on regional income per capita.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Publisher Info
Paper provided by Institut für Angewandte Wirtschaftsforschung (IAW) in its series IAW Discussion Papers with number
31.
Length: 38 pages Date of creation: May 2007 Date of revision: Handle: RePEc:iaw:iawdip:31
Contact details of provider: Postal: Ob dem Himmelreich 1, D-72074 T�bingen Phone: (+49) 7071 98 96 -0 Fax: (+49) 7071 98 96 -99 Email: Web page: http://www.iaw.edu/ More information through EDIRC
For technical questions regarding this item, or to correct its listing, contact: (Rolf Kleimann).
Find related papers by JEL classification: F2 - International Economics - - International Factor Movements and International Business F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)