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A New Measure of Trade Openness
Author(s) -
Squalli Jay,
Wilson Kenneth
Publication year - 2011
Publication title -
the world economy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.594
H-Index - 68
eISSN - 1467-9701
pISSN - 0378-5920
DOI - 10.1111/j.1467-9701.2011.01404.x
Subject(s) - openness to experience , economics , robustness (evolution) , measure (data warehouse) , trade barrier , international economics , international trade , computer science , psychology , social psychology , biochemistry , chemistry , database , gene
Trade openness, popularly measured as ( X + M )/ GDP in the hundreds of studies published to date, consistently considers the world's biggest trading countries such as the USA, the UK, Japan and Germany to be closed economies, irrespective of the data set used. This study suggests a composite trade share measure that more completely reflects reality by combining two important dimensions of trade openness: trade share and the relative importance of a country's trade level to total world trade. Robustness tests support the new proposed measure in lieu of the conventional measure of openness and suggest that the latter may not only be incomplete but may also overstate the impact of trade on such things as income and the environment.