Once Again, is Openness Good for Growth?

Abstract

The authors are grateful to Athanasios Vamvakidis for kindly sharing his dataset. They also thank Raphael Bergoeing, Sebastian Edwards, Alejandro Mico, Andrea Repetto, and seminar participants at IASE in Santiago de Chile, and the World Bank, for very useful discussions and comments. This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate. The views expressed herein are those of the author(s) and not necessarily those of the National Bureau of Economic Research.

Openness to International Trade and Economic Growth: A Cross-Country Empirical Investigation

“…2 Examples include Dollar (1992), Edwards (1992Edwards ( , 1998, Lee (1993), Sachs and Warner (1995), Harrison (1996), Vamvakidis (1999), Frankel and Romer (1999), Greenaway et al (2002), Yanikkaya (2003), Lee et al (2004), Aksoy and Salinas (2006), Foster (2008), Kneller et al (2008), Wacziarg and Welch (2008), Chang et al (2009), Kim (2011). also during 1960s and it is more likely that their trade policy measures did not change substantially over the period .…”

When is Trade Protection Good for Growth?

“…Using an instrumental variables approach based on geographical factors, Frankel and Romer (1999) find a large, positive (although not strongly statistically significant) correlation between trade openness and growth. Lee, Ricci, and Rigobon (2004) use "identification through heteroskedasticity" and find that openness has a positive, but small, effect on growth, controlling for the positive effect of growth on openness. Edwards (1998) shows a consistently positive relationship between growth and nine measures of openness.…”

Is Tariff Reduction a Viable Strategy for Economic Growth in the Periphery? An Examination of Tariff Interaction Effects in 69 Less Developed Countries

“…Consistent with these views, an extensive range of research successfully discovers a direct negative association between various measures of import restriction and economic growth (e.g. Dollar 1992;Lee 1993;Sachs and Warner 1995;Harrison 1996;Edwards 1998;Dollar and Kraay 2004;Lee et al 2004;Wacziarg and Welch 2008). But this line of research is much more controversial than is commonly recognized, as many engaged in this debate discover an inconsistent and/or weak association between trade policy and growth (e.g., Edwards 1992;Sala-i-Martin 1997;O'Rouke 2000;Clemens andWilliamson 2001, 2002;Rodriguez and Rodrik 2001;Irwin 2002;Irwin and Tervio 2002;Rodrik et al 2002;Yanikkaya 2003 ).…”

“…Although some successfully find a robust negative association between tariffs, as well as other protectionist policies, and national growth rates (Dollar 1992;Lee 1993;Sacks and Warner 1995;Harrison 1996;Edwards 1998;Lee et al 2004), several other studies reveal that this relationship is weak and/or mixed at best (Edwards 1992;Sala-i-Martin 1997;Clemens and Williamson 2001;Rodriguez and Rodrik 2001;Irwin and Tervio 2002;Rodrik et al 2002;Y anikkaya 2003). But by examining the tariff-growth link directly, these works fail to address some of the major arguments presented by Raul Prebisch and his particular version of the infant industry argument.…”