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Openness and Economic Growth in Pakistan

  • Musleh-Ud Din

    (Pakistan Institute of Development Economics, Islamabad.)

  • Ejaz Ghani

    (Pakistan Institute of Development Economics, Islamabad.)

  • Omer Siddique

    (Pakistan Institute of Development Economics, Islamabad.)

Trade and growth theories generally predict a positive relationship between openness to international trade and economic growth. There are a number of channels through which openness is thought to influence economic growth. First, a liberal trade regime enhances efficiency through greater competition and improved resource allocation. Second, greater access to world markets allows economies to overcome size limitations and benefit from economies of scale. Third, imports of capital and intermediate goods can contribute to the growth process by enlarging the productive capacity of the economy. Fourth, trade can lead to productivity gains through international diffusion and adoption of new technologies. Empirical studies on the relationship between openness and economic growth have largely supported the view that openness has a favourable impact on economic growth. It is not surprising, then, that the proposition that more open economies tend to grow faster has gained wide acceptance in academic as well as policy circles. The objective of this paper is to examine the relationship between openness and economic growth in the context of Pakistan’s economy. Section 2 reviews the literature on openness and economic growth. Section 3 provides an overview of trade liberalisation in Pakistan. Data and methodology are described in Section 4, while Section 5 presents the empirical results. Section 6 concludes the discussion.

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Article provided by Pakistan Institute of Development Economics in its journal The Pakistan Development Review.

Volume (Year): 42 (2003)
Issue (Month): 4 ()
Pages: 795-807

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Handle: RePEc:pid:journl:v:42:y:2003:i:4:p:795-807
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  1. 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.
  2. David H. Romer & Jeffrey A. Frankel, 1999. "Does Trade Cause Growth?," American Economic Review, American Economic Association, vol. 89(3), pages 379-399, June.
  3. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
  4. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-37, October.
  5. Sebastian Edwards, 1991. "Trade Orientation, Distortions and Growth in Developing Countries," NBER Working Papers 3716, National Bureau of Economic Research, Inc.
  6. Paul M. Romer, 1993. "New Goods, Old Theory, and the Welfare Costs of Trade Restrictions," NBER Working Papers 4452, National Bureau of Economic Research, Inc.
  7. Francisco Rodriguez & Dani Rodrik, 1999. "Trade Policy and Economic Growth: A Skeptic's Guide to Cross-National Evidence," NBER Working Papers 7081, National Bureau of Economic Research, Inc.
  8. Balassa, Bela, 1978. "Exports and economic growth : Further evidence," Journal of Development Economics, Elsevier, vol. 5(2), pages 181-189, June.
  9. Michaely, Michael, 1977. "Exports and growth : An empirical investigation," Journal of Development Economics, Elsevier, vol. 4(1), pages 49-53, February.
  10. repec:umd:umdeco:rodriguez9901 is not listed on IDEAS
  11. Chow, Peter C. Y., 1987. "Causality between export growth and industrial development : Empirial evidence from the NICs," Journal of Development Economics, Elsevier, vol. 26(1), pages 55-63, June.
  12. Elhanan Helpman & David T. Coe, 1993. "International RandD Spillovers," IMF Working Papers 93/84, International Monetary Fund.
  13. Zafar Iqbal & Ghulam Mustafa Zahid, 1998. "Macroeconomic Determinants of Economic Growth in Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 37(2), pages 125-148.
  14. Tyler, William G., 1981. "Growth and export expansion in developing countries : Some empirical evidence," Journal of Development Economics, Elsevier, vol. 9(1), pages 121-130, August.
  15. Yanikkaya, Halit, 2003. "Trade openness and economic growth: a cross-country empirical investigation," Journal of Development Economics, Elsevier, vol. 72(1), pages 57-89, October.
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