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Does Trade Openness Affect the Speed of Output Convergence? Some Empirical Evidence

In this paper we develop flexible techniques for measuring the speed of output convergence between countries when such convergence may be of an unknown non-linear form. We then calculate these convergence speeds for various countries, in terms of half-lives, using a time-series data-set for 88 countries. These calculations are based on both nonparametric kernel regression and ‘fuzzy’ regression, and the results are compared with more restrictive estimates based on the assumption of linear convergence. The calculated half-lives are regressed, again in various flexible ways, on cross-section data for the degree of openness to trade. We find evidence that favours the hypothesis that increased trade openness is associated with a faster rate of convergence in output between countries.

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Paper provided by Department of Economics, University of Victoria in its series Econometrics Working Papers with number 0509.

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Length: 29 pages
Date of creation: 04 Jul 2005
Date of revision:
Handle: RePEc:vic:vicewp:0509
Note: ISSN 1485-6441
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Web page: http://web.uvic.ca/econ

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