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Trade Openness And Economic Growth Can We Estimate The Precise Effect?

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  • Karras, Georgios

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Abstract

While various theoretical models predict that openness to international trade accelerates productivity and promotes economic growth, the empirical evidence has been mixed or imprecise. This paper investigates the issue using two panel data sets: one of 56 countries covering the period 1951-1998, and another of 105 countries over 1960-1997. The results show that the effect of trade openness on economic growth is positive, permanent, statistically significant, and economically sizable. This effect is robust across the two data sets used and a number of different estimation methods and lag lengths. Specifically, it is shown that increasing trade (exports plus imports) as a fraction of GDP by 10 percentage points, permanently increases the real growth rate of GDP per capita by 0.25 to 0.3 percent.

Suggested Citation

  • Karras, Georgios, 2003. "Trade Openness And Economic Growth Can We Estimate The Precise Effect?," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 3(1).
  • Handle: RePEc:eaa:aeinde:v:3:y:2003:i:3_1
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    Cited by:

    1. Shahbaz, Muhammad, 2012. "Does trade openness affect long run growth? Cointegration, causality and forecast error variance decomposition tests for Pakistan," Economic Modelling, Elsevier, vol. 29(6), pages 2325-2339.
    2. Guisan, M.C. & Exposito, P., 2006. "Production by sector in China, India and OECD Countries, 1985-2005," Regional and Sectoral Economic Studies, Euro-American Association of Economic Development, vol. 6(2).
    3. repec:eco:journ1:2018-01-10 is not listed on IDEAS
    4. Malefane, Malefa Rose & Odhiambo, Nicholas M., 2018. "Impact Of Trade Openness On Economic Growth: Empirical Evidence From South Africa," Working Papers 23654, University of South Africa, Department of Economics.
    5. Konya, L., 2004. "Export-Led Growth, Growth-Driven Export, Both or None? Granger Causality Analysis on OECD Countries," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 4(1).
    6. Farid Ullah & Abdur Rauf & Nasir Rasool, 2014. "Analyzing the Impact of Globalization on Economic Growth," Acta Universitatis Danubius. OEconomica, Danubius University of Galati, issue 10(2), pages 87-99, April.
    7. Muhammad AFZAl, 2012. "Do Structural Transformation And Trade Liberalisation Cause Economic Growth In Pakistan?," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 12(1).
    8. KARRAS, Georgios, 2008. "GROWTH AND CONVERGENCE, 1950-2003. What Can We Learn from the Solow Model?," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 8(1), pages 5-18.
    9. Bartolini, David & Ninka, Eniel & Santolini, Raffaella, 2017. "Tax Decentralisation, Labour productivity and Employment," MPRA Paper 81070, University Library of Munich, Germany.
    10. Jaunky, V.C & Khadaroo, A.J., 2008. "Health Care Expenditure And Gdp: An African Perspective," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 8(1), pages 131-146.
    11. Talberth, John & Bohara, Alok K., 2006. "Economic openness and green GDP," Ecological Economics, Elsevier, vol. 58(4), pages 743-758, July.
    12. Hlalefang Khobai & Nwabisa Kolisi & Clement Moyo, 2018. "The Relationship Between Trade Openness and Economic Growth: The Case of Ghana and Nigeria," International Journal of Economics and Financial Issues, Econjournals, vol. 8(1), pages 77-82.

    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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