The relationship between trade openness and economic growth: some new insights on the openness measurement issue

In spite of the wave of liberalization undertaken during the last decades, the debate, among economists, on the links and causality between openness, growth and income distribution is still open. Empirical results most often suggest that, in the long run, more outward-oriented countries register better economic growth performance. However, this empirical evidence continues to be questioned for at least two main reasons: there are still some discussions and doubts on the way countries' openness is measured on the one hand, the debate on the estimation methodology is still open on the other hand. The aim of this paper is to contribute to this debate by proposing a more elaborated way of measuring openness taking into account two additional dimensions of countries' integration in world trade: quality and diversification. Our results confirm that countries exporting higher quality products and countries exporting more diversified products grow more rapidly. The impact of the trade dependency ratio is found to be non-linear: it is lower (even negative) for countries which exports are slightly diversified or concentrated on low quality products.