Paradox of Trade Openness: Moderated Mediating Model

Abstract

This study compares the impact of trade openness on gross domestic product (GDP) growth and human development for a panel of ASEAN countries from 2001 to 2021. Our results show that trade has a positive impact on GDP growth but a negative impact on human development due to environmental pollution and human rights violations. To mitigate these negative effects and increase prosperity through trade, we propose focusing on governance and foreign direct investment (FDI). We reveal that governance plays a moderated mediating role and FDI a moderating role, both strengthening the positive effect of trade openness on economic development.

Keywords: Financial development, Governance, Gross domestic product, Human development, Trade openness