Trade, Extent of the Market, and Economic Growth 1960-1996
UPF Economics and Business Working Paper No. 765
33 Pages Posted: 12 Jul 2004
Date Written: December 2003
We find that trade and domestic market size are robust determinants of economic growth over the 1960-1996 period when trade openness is measured as the US dollar value of imports and exports relative to GDP in PPP US$ ('real openness'). When trade openness is measured as the US dollar value of imports and exports relative to GDP in exchange rate US$ ('nominal openness') however, trade and the size of domestic markets are often non-robust determinants of growth. We argue that real openness is the more appropriate measure of trade and that our empirical results should be seen as evidence in favor of the extent-of-the-market hypothesis.
Keywords: Extent of the market, institutions, growth
JEL Classification: F43, O40
Suggested Citation: Suggested Citation