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The Link Between Openness and Long-Run Economic Growth


Lill Andersen, Ronald Babula


We review the most cited empirical analyses of the relationship between international trade and economic growth and more recent empirical analyses of the link between trade and productivity growth. We conclude that there is likely to be a positive relationship between international trade and economic growth. There are, however, two caveats. First, we are concerned about the way problems of measurement error and endogeneity are handled in much of the empirical literature. The second caveat relates to the ability of developing countries to gain productivity growth through trade liberalization. To do so, it may very well be necessary to invest in, e.g., education facilities, to ensure property rights and to build up institutions.

Tags(s): Econometrics