Trade openness and economic growth : an empirical approach

Abstract

Economic growth has beneficial effects on the general well-being of a society. Identifying and analyzing its determining factors becomes essential to improve economic policy decisions. Among these factors, the effects of trade openness are widely debated in the literature. Although there are many works that study the relationship between trade openness and economic growth, the results are heterogeneous and differ depending on the level of development of the economies, the openness variable considered, among other conditions. The main objective of this paper is to investigate the existence of a relationship between trade openness and economic growth in a large group of developed and developing countries, considering different openness measures, and thus outline recommendations for economic policies that promote growth. The central hypothesis is that trade openness has a different effect on the economic growth rate depending on the degree of development of the economies and the openness variable analysed. To meet the objective, parametric estimates were used for the period 1960-2019, and alternative measures of openness were constructed to the conventional indicator defined as the sum of exports and imports in relation to the gross domestic product (GDP).The results obtained in this work differ depending on the level of development of the countries analysed and the openness measures used.