Openness and Growth: What's the Empirical Relationship?

36 Pages Posted: 20 Mar 2003 Last revised: 4 Sep 2022

See all articles by Robert E. Baldwin

Robert E. Baldwin

University of Wisconsin at Madison; National Bureau of Economic Research (NBER)

Date Written: March 2003

Abstract

There is still disagreement among economists concerning how a country's international economic policies and its rate of economic growth interact, despite a number of multi-country case studies utilizing comparable analytical frameworks, numerous econometric studies using large cross-country data sets, and important theoretical advances in growth theory. This paper briefly surveys this literature and points out the main reasons for the disagreements. Particular attention is given to an important study by Francisco Rodriguez and Dani Rodrik (2001) criticizing the conclusion of a number of recent multi-country statistical studies that openness is associated with higher growth rates. Rodriguez and Rodrik show that openness simply in the sense of liberal trade policies seems to be no guarantee of faster growth. However, the conclusion of most researchers involved in either country studies or multi-country statistical tests that lower trade barriers in combination with a stable and non-discriminatory exchange-rate system, prudent monetary and fiscal policies and corruption-free administration of economic policies promote economic growth still seems to remain valid.

Suggested Citation

Baldwin, Robert E., Openness and Growth: What's the Empirical Relationship? (March 2003). NBER Working Paper No. w9578, Available at SSRN: https://ssrn.com/abstract=389449

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