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Openness to international trade and economic growth: A cross-country empirical investigation

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  • Ulaşan, Bülent

Abstract

In this paper, we revisit the empirical evidence on the relationship between trade openness and long-run economic growth over the sample period 1960-2000. In contrast to previous studies focusing mainly on the period 1970-1990, this paper reassesses the openness-growth nexus over a much longer sample period, enabling us to better account both trade policy stance and long-run growth dynamics. We carry out our empirical investigation by employing various openness measures suggested in the literature rather than relying on a few proxy variables. We also construct three additional composite trade policy indexes directly measuring trade policy stance. Our findings indicate that many openness variables are positively and significantly correlated with long-run economic growth. However, in some cases, this result is driven by the presence of a few outlying countries. Adding to the fragility of the openness-growth association, the significance of openness variables disappears once other growth determinants, such as institutions, population heterogeneity, geography and macroeconomic stability are accounted for.

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  • Ulaşan, Bülent, 2012. "Openness to international trade and economic growth: A cross-country empirical investigation," Economics Discussion Papers 2012-25, Kiel Institute for the World Economy (IfW Kiel).
    • Handle: RePEc:zbw:ifwedp:201225
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    More about this item

    Keywords

    Economic Growth; trade openness; outliers; weighted least squares;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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