Trade Openness and Growth: Pursuing Empirical Glasnost

52 Pages Posted: 23 Aug 2007

See all articles by Andreas Billmeier

Andreas Billmeier

International Monetary Fund (IMF) - Middle East and Central Asia Department

Tommaso Nannicini

Bocconi University - Department of Economics; IZA Institute of Labor Economics

Date Written: July 2007

Abstract

Studies of the impact of trade openness on growth are based either on cross-country analysis-which lacks transparency-or case studies-which lack statistical rigor. We apply transparent econometric methods drawn from the treatment evaluation literature to make the comparison between treated (i.e., open) and control (i.e., closed) countries explicit while remaining within a unified statistical framework. First, matching estimators highlight the rather far-fetched country comparisons underlying common cross-country results. When appropriately restricting the sample, we confirm a positive and significant effect of openness on growth. Second, we apply synthetic control methods-which account for endogeneity due to unobservable heterogeneity-to countries that liberalized their trade regime and we show that trade liberalization has often had a positive effect on growth.

Keywords: Working Paper, Trade policy, International trade, Economic growth, Economic models

Suggested Citation

Billmeier, Andreas and Nannicini, Tommaso, Trade Openness and Growth: Pursuing Empirical Glasnost (July 2007). IMF Working Papers, Vol. , pp. 1-50, 2007. Available at SSRN: https://ssrn.com/abstract=1007905

Andreas Billmeier (Contact Author)

International Monetary Fund (IMF) - Middle East and Central Asia Department ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Tommaso Nannicini

Bocconi University - Department of Economics ( email )

Via Gobbi 5
Milan, 20136
Italy

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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