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Openness and Growth: What's the Empirical Relationship?

In: Challenges to Globalization: Analyzing the Economics

  • Robert E. Baldwin

There is still disagreement among economists concerning how a country's international economic policies and its rate of economic growth interact, despite a number of multi-country case studies utilizing comparable analytical frameworks, numerous econometric studies using large cross-country data sets, and important theoretical advances in growth theory. This paper briefly surveys this literature and points out the main reasons for the disagreements. Particular attention is given to an important study by Francisco Rodriguez and Dani Rodrik (2001) criticizing the conclusion of a number of recent multi-country statistical studies that openness is associated with higher growth rates. Rodriguez and Rodrik show that openness simply in the sense of liberal trade policies seems to be no guarantee of faster growth. However, the conclusion of most researchers involved in either country studies or multi-country statistical tests that lower trade barriers in combination with a stable and non-discriminatory exchange-rate system, prudent monetary and fiscal policies and corruption-free administration of economic policies promote economic growth still seems to remain valid.

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This chapter was published in:
  • Robert E. Baldwin & L. Alan Winters, 2004. "Challenges to Globalization: Analyzing the Economics," NBER Books, National Bureau of Economic Research, Inc, number bald04-1.
  • This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number 9548.
    Handle: RePEc:nbr:nberch:9548
    Contact details of provider: Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
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    1. Dani Rodrik, 1996. "Why Do More Open Economies Have Bigger Governments?," NBER Working Papers 5537, National Bureau of Economic Research, Inc.
    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. Charles R. Frank Jr. & Kwang Suk Kim & Larry E. Westphal, 1975. "Foreign Trade Regimes and Economic Development: South Korea," NBER Books, National Bureau of Economic Research, Inc, number fran75-1.
    4. Peter Doyle & Peter F. Christoffersen, 1998. "From Inflation to Growth; Eight Years of Transition," IMF Working Papers 98/100, International Monetary Fund.
    5. Edward E. Leamer, 1987. "Measures of Openness," UCLA Economics Working Papers 447, UCLA Department of Economics.
      • Edward E. Leamer, 1988. "Measures of Openness," NBER Chapters, in: Trade Policy Issues and Empirical Analysis, pages 145-204 National Bureau of Economic Research, Inc.
    6. Ann Harrison, 1995. "Openness and Growth: A Time-Series, Cross-Country Analysis for Developing Countries," NBER Working Papers 5221, National Bureau of Economic Research, Inc.
    7. Ricardo Hausmann & Dani Rodrik, 2002. "Economic Development as Self-Discovery," NBER Working Papers 8952, National Bureau of Economic Research, Inc.
    8. Krueger, Anne O, 1997. "Trade Policy and Economic Development: How We Learn," American Economic Review, American Economic Association, vol. 87(1), pages 1-22, March.
    9. Baldwin, Robert E, 1969. "The Case against Infant-Industry Tariff Protection," Journal of Political Economy, University of Chicago Press, vol. 77(3), pages 295-305, May/June.
    10. Edwards, Sebastian, 1993. "Openness, Trade Liberalization, and Growth in Developing Countries," Journal of Economic Literature, American Economic Association, vol. 31(3), pages 1358-93, September.
    11. Jagdish N. Bhagwati, 1978. "Anatomy and Consequences of Exchange Control Regimes," NBER Books, National Bureau of Economic Research, Inc, number bhag78-1.
    12. Douglas A. Irwin, 2002. "Did Import Substitution Promote Growth in the Late Nineteenth Century?," NBER Working Papers 8751, National Bureau of Economic Research, Inc.
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