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Trade Openness and Growth: Pursuing Empirical Glasnost

  • Andreas Billmeier
  • Tommaso Nannicini

Studies of the impact of trade openness on growth are based either on cross-country analysis-which lacks transparency-or case studies-which lack statistical rigor. We apply transparent econometric methods drawn from the treatment evaluation literature to make the comparison between treated (i.e., open) and control (i.e., closed) countries explicit while remaining within a unified statistical framework. First, matching estimators highlight the rather far-fetched country comparisons underlying common cross-country results. When appropriately restricting the sample, we confirm a positive and significant effect of openness on growth. Second, we apply synthetic control methods-which account for endogeneity due to unobservable heterogeneity-to countries that liberalized their trade regime and we show that trade liberalization has often had a positive effect on growth.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 07/156.

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Length: 52
Date of creation: 01 Jul 2007
Date of revision:
Handle: RePEc:imf:imfwpa:07/156
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  18. Levine, Ross & Renelt, David, 1991. "A sensitivity analysis of cross-country growth regressions," Policy Research Working Paper Series 609, The World Bank.
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