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Openness and Human Capital as Sources of Productivity Growth: An Empirical Investigation

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  • Måns Söderbom

    (Centre for the Study of African Economies)

  • Francis Teal

    (Centre for the Study of African Economies)

Abstract

Do openness to trade and higher levels of human capital promote faster productivity growth? That they do is a key implication of several versions of endogenous growth theory. To answer the question we use panel data on 93 countries spanning the 1970-2000 period. Controlling for fixed effects as well as endogeneity, the results show a significant effect of openness on productivity growth. If the level of openness of an economy is doubled the underlying rate of technical progress will increase by 0.8 per cent per annum. We find an effect, significant at the ten per cent level, of the level of human capital on the level of income but no effect on underlying productivity growth. Our preferred estimator combines high and low frequency differences of the data. We discuss reasons why this estimator is well suited for empirical analysis of economic growth.

Suggested Citation

  • Måns Söderbom & Francis Teal, 2004. "Openness and Human Capital as Sources of Productivity Growth: An Empirical Investigation," Development and Comp Systems 0409031, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpdc:0409031
    Note: Type of Document - pdf; pages: 30
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    3. German Hector Gonzalez & Fernando Andres Delbianco, 2011. "Apertura y productividad total de los factores: análisis de la contemporaneidad en los quiebres estructurales para América Latina y el Caribe," Revista de Analisis Economico – Economic Analysis Review, Universidad Alberto Hurtado/School of Economics and Business, vol. 26(1), pages 53-81, Junio.
    4. Rahmatina A. Kasri, 2011. "Time series evidence on education and economic growth in Indonesia," Economic Journal of Emerging Markets, Universitas Islam Indonesia, Department of Economics, vol. 3(2), pages 109-123, April.
    5. Bigsten, Arne, 2003. "Globalisation and the Asia-Pacific Revival," Working Papers in Economics 118, University of Gothenburg, Department of Economics.
    6. Dinkneh Gebre Borojo & Yushi Jiang, 2016. "The Impact of Africa-China Trade Openness on Technology Transfer and Economic Growth for Africa: A Dynamic Panel Data Approach," Annals of Economics and Finance, Society for AEF, vol. 17(2), pages 403-431, November.
    7. Amavilah, Voxi Heinrich, 2006. "Intensity of technology use and per capita real GDP across some African countries," MPRA Paper 1675, University Library of Munich, Germany.
    8. Özdemir Onur, 2019. "Financialization and the Labor Share of Income," Review of Economic Perspectives, Sciendo, vol. 19(4), pages 265-306, December.
    9. Markus Eberhardt & Christian Helmers, 2010. "Untested Assumptions and Data Slicing: A Critical Review of Firm-Level Production Function Estimators," Economics Series Working Papers 513, University of Oxford, Department of Economics.
    10. Majid Karimzadeh & Behzad Karimzadeh, 2013. "Impact of Trade and Human Capital on Economic Growth of India: An Empirical Analysis," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 16(48), pages 201-214, June.

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    More about this item

    Keywords

    Productivity; openness; human capital; growth; panel data;
    All these keywords.

    JEL classification:

    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

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