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The relationship between trade openness and economic growth: Some new insights on the openness measurement issue
Author(s) -
HuchetBourdon Marilyne,
Le Mouël Chantal,
Vijil Mariana
Publication year - 2018
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/twec.12586
Subject(s) - openness to experience , economics , variety (cybernetics) , estimation , international economics , quality (philosophy) , margin (machine learning) , generalized method of moments , panel data , developing country , international trade , economic integration , econometrics , economic growth , mathematics , psychology , social psychology , philosophy , statistics , management , epistemology , machine learning , computer science
Abstract Empirical results on the links between trade openness and economic growth often suggest that, in the long run, more outward‐oriented countries register better economic growth. However, a similar level of trade openness can hide different types of trade structures. The aim of this paper was to enrich the way of measuring trade openness taking into account two different dimensions of countries’ integration in world trade: export quality and export variety. Based on the estimation of an endogenous growth model on a panel of 169 countries between 1988 and 2014 using a generalised method of moments estimator, our results confirm that countries exporting higher quality products and new varieties grow more rapidly. More importantly, we find a non‐linear pattern between the export ratio and the quality of the export basket, suggesting that openness to trade may impact growth negatively for countries which are specialised in low‐quality products. A non‐linear relationship between export variety, the export ratio and growth is also found, suggesting that countries increasing their exports will grow more rapidly after reaching a certain degree of the extensive margin of exports.