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Openness, Specialization, and Productivity Growth in Less Developed Countries

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  • James E. Rauch
  • Diana Weinhold

Abstract

The commonly observed positive relationship between openness and growth is consistent with many theories of economic growth and thus does not provide direct evidence in support of any one of them. Quah and Rauch (1990), however, imply that increased specialization accelerates productivity growth by more fully realizing dynamic economies of scale. We use dynamic panel estimation to test this hypothesis by examining specialization in thirty-five countries. We show that in the less developed countries specialization is positively and significantly correlated with increased manufacturing productivity growth, even when variables, such as openness, inflation, government spending, and investment are controlled for.

Suggested Citation

  • James E. Rauch & Diana Weinhold, 1999. "Openness, Specialization, and Productivity Growth in Less Developed Countries," Canadian Journal of Economics, Canadian Economics Association, vol. 32(4), pages 1009-1027, August.
    • Handle: RePEc:cje:issued:v:32:y:1999:i:4:p:1009-1027
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    References listed on IDEAS

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    1. Edwards, Sebastian, 1992. "Trade orientation, distortions and growth in developing countries," Journal of Development Economics, Elsevier, vol. 39(1), pages 31-57, July.
    2. Anderson, T. W. & Hsiao, Cheng, 1982. "Formulation and estimation of dynamic models using panel data," Journal of Econometrics, Elsevier, vol. 18(1), pages 47-82, January.
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    More about this item

    JEL classification:

    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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