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What Does Trade Openness Measure?

Author

Listed:
  • Eiji Fujii

Abstract

An empirical measure of trade openness is defined as the ratio of total trade to GDP, and represents a convenient variable routinely used for cross‐country studies on a variety of issues. However, the effects that the crude measure captures remain ambiguous, making it difficult to interpret the empirical results. Drawing on several strands of the literature, this study examines the informational content of the trade openness measure using intranational and international data. We find that, even for fully integrated economies within a country, trade openness is approximately half as variable as it is for segmented diverse countries around the world. The information it conveys is better characterized as the extent of the economic remoteness and idiosyncratic distribution of sectoral production. The cross‐country variation of trade openness derives more from the variability in GDP than trade.

Suggested Citation

  • Eiji Fujii, 2019. "What Does Trade Openness Measure?," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 81(4), pages 868-888, August.
    • Handle: RePEc:bla:obuest:v:81:y:2019:i:4:p:868-888
    DOI: 10.1111/obes.12275
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    Cited by:

    1. Somaiyah Alalmai, 2025. "Exploring the Nexus Between Financial Deepening and Economic Performance: Evidence from Saudi Arabia," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 15(3), pages 1-4.
    2. Iemmi, Valentina, 2021. "Global collective action in mental health financing: Allocation of development assistance for mental health in 142 countries, 2000–2015," Social Science & Medicine, Elsevier, vol. 287(C).
    3. Kacou, Kacou Yves Thierry & Kassouri, Yacouba & Evrard, Talnan Hongwopena & Altuntaş, Mehmet, 2022. "Trade openness, export structure, and labor productivity in developing countries: Evidence from panel VAR approach," Structural Change and Economic Dynamics, Elsevier, vol. 60(C), pages 194-205.
    4. Michael Bleaney & Mo Tian, 2023. "The trade‐GDP ratio as a measure of openness," The World Economy, Wiley Blackwell, vol. 46(5), pages 1319-1332, May.
    5. Vianna, Andre C. & Mollick, Andre V., 2021. "Threshold effects of terms of trade on Latin American growth," Economic Systems, Elsevier, vol. 45(4).
    6. Zhao, Hong & Li, Yiying & Wang, Zengtao & Zhao, Runnan, 2024. "Trade liberalization, regional trade openness degree, and foreign direct investment:Evidence from China," Emerging Markets Review, Elsevier, vol. 59(C).
    7. Wannaphong Durongkaveroj, 2024. "Trade openness and the growth-poverty nexus: Reappraisal with a new openness indicator," Departmental Working Papers 2024-7, The Australian National University, Arndt-Corden Department of Economics.
    8. Arribas, Iván & Bensassi, Sami & Tortosa-Ausina, Emili, 2020. "Trade integration in the European Union: Openness, interconnectedness, and distance," The North American Journal of Economics and Finance, Elsevier, vol. 52(C).
    9. Roseline Nyakerario Misati & Anne Kamau & Hared Nassir, 2019. "Do migrant remittances matter for financial development in Kenya?," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 5(1), pages 1-25, December.
    10. Lubomír Civín & Luboš Smutka, 2020. "Vulnerability of European Union Economies in Agro Trade," Sustainability, MDPI, vol. 12(12), pages 1-33, June.
    11. Katarzyna Szymczyk & Dilek Şahin & Haşim Bağcı & Ceyda Yerdelen Kaygın, 2021. "The Effect of Energy Usage, Economic Growth, and Financial Development on CO 2 Emission Management: An Analysis of OECD Countries with a High Environmental Performance Index," Energies, MDPI, vol. 14(15), pages 1-21, August.
    12. Muhammad Kashif & Atta Ullah & Saif Ullah & Ningyu Qian, 2026. "Financial technology (FinTech) and green economy synergies for climate resilience and net-zero goals: evidence from G20 countries," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 12(1), pages 1-47, December.
    13. Ha Thi-Thu Le & Trang Thi-Dai Luong & Trang Thi Thu Nguyen & Duy Van Nguyen, 2023. "Determinants of Intellectual Property Rights Protection in Asian Developing Countries," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 14(4), pages 4780-4806, December.
    14. Gislain Stéphane Gandjon Fankem & Cédric Feyom, 2024. "Is trade openness a barrier to industrialization? Evidence from Sub-Saharan Africa," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 160(2), pages 713-759, May.

    More about this item

    JEL classification:

    • F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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