This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Openness can be good for growth : the role of policy complementarities

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Chang, Roberto
Kaltani, Linda
Loayza, Norman

Additional information is available for the following registered author(s):

Abstract

The authors study how the effect of trade openness on economic growth depends on complementary reforms that help a country take advantage of international competition. This issue is illustrated with a simple Harris-Todaro model where output gains after trade liberalization depend on the degree of labor market flexibility. In that model, trade protection may ameliorate the problem of underemployment (and underproduction) in sectors affected by labor market distortions. Hence, trade liberalization unambiguously increases per capita income only when labor markets are sufficiently flexible. The authors then present some panel evidence on how the growth effect of openness depends on a variety of structural characteristics. For this purpose, they use a non-linear growth regression specification that interacts a proxy of trade openness with proxies of educational investment, financial depth, inflation stabilization, public infrastructure, governance, labor-market flexibility, ease of firm entry, and ease of firm exit. They find that the growth effects of openness are positive and economically significant if certain complementary reforms are undertaken.

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 file. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www-wds.worldbank.org/servlet/WDSContentServer/WDSP/IB/2005/10/31/000016406_20051031155510/Rendered/PDF/wps3763.pdf
File Format: application/pdf
File Function:
Download Restriction: no

Publisher Info
Paper provided by The World Bank in its series Policy Research Working Paper Series with number 3763.

Download reference. The following formats are available: HTML, plain text, BibTeX, RIS (EndNote), ReDIF
Length:
Date of creation: 01 Nov 2005
Date of revision:
Handle: RePEc:wbk:wbrwps:3763

Contact details of provider:
Postal: 1818 H Street, N.W., Washington, DC 20433
Email:
Web page: http://www.worldbank.org/
More information through EDIRC

For technical questions regarding this item, or to correct its listing, contact: (Roula I. Yazigi).

Related research
Keywords: Free Trade Pro-Poor Growth and Inequality Economic Theory&Research Inequality Labor Markets

Other versions of this item:

This paper has been announced in the following NEP Reports: 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.:
  1. Simeon Djankov & Rafael La Porta & Florencio Lopez-de-Silane & Andrei Shleifer & Juan Botero, 2003. "The Regulation of Labor," NBER Working Papers 9756, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  2. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Blackwell Publishing, vol. 58(2), pages 277-97, April. [Downloadable!] (restricted)
  3. Bolaky, Bineswaree & Freund, Caroline, 2004. "Trade, regulations, and growth," Policy Research Working Paper Series 3255, The World Bank. [Downloadable!]
  4. Beck, Thorsten & Demirguc-Kunt, Asli & Levine, Ross, 1999. "A new database on financial development and structure," Policy Research Working Paper Series 2146, The World Bank. [Downloadable!]
  5. Alwyn Young, 1991. "Learning by Doing and the Dynamic Effects of International Trade," NBER Working Papers 3577, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  6. 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(1995-1), pages 1-118. [Downloadable!]
  7. Daron Acemoglu & Fabrizio Zilibotti, 2001. "Productivity Differences," The Quarterly Journal of Economics, MIT Press, vol. 116(2), pages 563-606, May. [Downloadable!] (restricted)
    Other versions:
  8. Alonso-Borrego, Cesar & Arellano, Manuel, 1999. "Symmetrically Normalized Instrumental-Variable Estimation Using Panel Data," Journal of Business & Economic Statistics, American Statistical Association, vol. 17(1), pages 36-49, January.
  9. Harrison, Ann, 1996. "Openness and growth: A time-series, cross-country analysis for developing countries," Journal of Development Economics, Elsevier, vol. 48(2), pages 419-447, March. [Downloadable!] (restricted)
    Other versions:
  10. Edwards, Sebastian, 1998. "Openness, Productivity and Growth: What Do We Really Know?," Economic Journal, Royal Economic Society, vol. 108(447), pages 383-98, March. [Downloadable!] (restricted)
    Other versions:
  11. César Calderón & Norman Loayza & Klaus Schmidt-Hebbel, 2004. "External Conditions and Growth Performance," Working Papers Central Bank of Chile 292, Central Bank of Chile. [Downloadable!]
  12. Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, vol. 68(1), pages 29-51, July. [Downloadable!] (restricted)
    Other versions:
  13. Romain Wacziarg & Karen Horn Welch, 2003. "Trade Liberalization and Growth: New Evidence," NBER Working Papers 10152, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  14. Matsuyama, Kiminori, 1992. "Agricultural productivity, comparative advantage, and economic growth," Journal of Economic Theory, Elsevier, vol. 58(2), pages 317-334, December. [Downloadable!] (restricted)
    Other versions:
  15. Brecher, Richard A., 1974. "Optimal commercial policy for a minimum-wage economy," Journal of International Economics, Elsevier, vol. 4(2), pages 139-149, May. [Downloadable!] (restricted)
  16. Simeon Djankov & Rafael La Porta & Florencio Lopez-De-Silanes & Andrei Shleifer, 2002. "The Regulation Of Entry," The Quarterly Journal of Economics, MIT Press, vol. 117(1), pages 1-37, February. [Downloadable!] (restricted)
    Other versions:
  17. Young, Alwyn, 1991. "Learning by Doing and the Dynamic Effects of International Trade," The Quarterly Journal of Economics, MIT Press, vol. 106(2), pages 369-405, May. [Downloadable!] (restricted)
  18. Levine, Ross & Loayza, Norman & Beck, Thorsten, 2000. "Financial intermediation and growth: Causality and causes," Journal of Monetary Economics, Elsevier, vol. 46(1), pages 31-77, August. [Downloadable!] (restricted)
    Other versions:
  19. Canning, David, 1998. "A Database of World Stocks of Infrastructure, 1950-95," World Bank Economic Review, Oxford University Press, vol. 12(3), pages 529-47, September.
  20. Griliches, Zvi & Hausman, Jerry A., 1986. "Errors in variables in panel data," Journal of Econometrics, Elsevier, vol. 31(1), pages 93-118, February. [Downloadable!] (restricted)
    Other versions:
  21. R Blundell & Steven Bond, . "Initial conditions and moment restrictions in dynamic panel data model," Economics Papers W14&104., Economics Group, Nuffield College, University of Oxford. [Downloadable!]
    Other versions:
  22. Laura Alfaro & Areendam Chanda & Sebnem Kalemli-Ozcan & Selin Sayek, 2003. "FDI Spillovers, Financial Markets and Economic Development," IMF Working Papers 03/186, International Monetary Fund. [Downloadable!]
  23. Jeffrey Sachs & Andrew Warner, 1995. "Economic Reform and the Progress of Global Integration," Harvard Institute of Economic Research Working Papers 1733, Harvard - Institute of Economic Research.
  24. David Dollar & Aart Kraay, 2004. "Trade, Growth, and Poverty," Economic Journal, Royal Economic Society, vol. 114(493), pages F22-F49, 02. [Downloadable!] (restricted)
    Other versions:
  25. Eduardo Borensztein & Jose De Gregorio & Jong-Wha Lee, 1995. "How Does Foreign Direct Investment Affect Economic Growth?," NBER Working Papers 5057, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  26. Sachs, Jeffrey D. & Warner, Andrew M., 1999. "The big push, natural resource booms and growth," Journal of Development Economics, Elsevier, vol. 59(1), pages 43-76, June. [Downloadable!] (restricted)
Full references

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.)

  1. Francois, Joseph & Manchin, Miriam, 2007. "Institutions, infrastructure, and trade," Policy Research Working Paper Series 4152, The World Bank. [Downloadable!]
    Other versions:
  2. Prüfer, Patricia & Tondl, Gabriele, 2007. "Does it Make a Difference? Comparing Growth Effects of European and North American FDI in Latin America," Proceedings of the German Development Economics Conference, Göttingen 2007 26, Verein für Socialpolitik, Research Committee Development Economics. [Downloadable!]
  3. Ramirez-Rondán Nelson, 2007. "Nonlinear Volatility Effects on Growth in Developing Economies," Working Papers 2007-016, Banco Central de Reserva del Perú. [Downloadable!]
  4. Nelson Ramírez-Rondán & Saki Bigio, 2006. "Corruption and Development Indicators: An Empirical Review," Working Papers 2006-007, Banco Central de Reserva del Perú. [Downloadable!]
  5. Rishi Goyal & Ratna Sahay, 2007. "Volatility and Growth in Latin America: An Episodic Approach," IMF Working Papers 06/287, International Monetary Fund. [Downloadable!]
  6. Paul Castillo & Carlos Montoro & Vicente Tuesta, 2006. "Stylized Facts of the Peruvian Economy," Working Papers 2006-005, Banco Central de Reserva del Perú. [Downloadable!]
  7. Loayza, Norman V. & Raddatz, Claudio, 2006. "The structural determinants of external vulnerability," Policy Research Working Paper Series 4089, The World Bank. [Downloadable!]
  8. Salinas, Gonzalo & Aksoy, Ataman, 2006. "Growth before and after trade liberalization," Policy Research Working Paper Series 4062, The World Bank. [Downloadable!]
  9. Raphael Bergoeing & Andrea Repetto, 2006. "Micro Efficiency and Aggregate Growth in Chile," Documentos de Trabajo 218, Centro de Economía Aplicada, Universidad de Chile. [Downloadable!]
    Other versions:
  10. Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer, 2007. "The Economic Consequences of Legal Origins," NBER Working Papers 13608, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  11. Francisco Rodriguez, 2007. "Openness and growth: what have we learned?," Working Papers 51, United Nations, Department of Economics and Social Affairs. [Downloadable!]
    Other versions:
  12. Charles Ackah, & Oliver Morrissey, . "Trade Liberalisation is Good for You if You are Rich," Discussion Papers 07/01, University of Nottingham, CREDIT. [Downloadable!]
  13. Laura Alfaro & Areendam Chanda & Sebnem Kalemli-Ozcan & Selin Sayek, 2006. "How Does Foreign Direct Investment Promote Economic Growth? Exploring the Effects of Financial Markets on Linkages," DEGIT Conference Papers c011_023, DEGIT, Dynamics, Economic Growth, and International Trade. [Downloadable!]
    Other versions:
  14. Bayraktar, Nihal & Wang, Yan, 2006. "Banking sector openness and economic growth," Policy Research Working Paper Series 4019, The World Bank. [Downloadable!]
Statistics
Access and download statistics

Did you know? You too can volunteer for RePEc, for example by encouraging others to register as authors.

This page was last updated on 2008-7-7.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.