Does Trade Openness cause Growth? : An Empirical Investigation

Abstract: This dissertation investigates the casual relationship between trade openness and economic growth in a sample of 87 countries (developing & developed) during the period 1970-2013. According to the previous literature, the openness-growth relationship seems to be relatively unclear and inconclusive, although the general tendency is that openness has a positive impact on economic growth. Our empirical results confirm this ambiguous relationship and provide evidence which vary across model specification. Regarding of the per capita income regression for all countries, trade openness has a positive but not a robust impact on income, as the coefficient of openness is positive but at the same time insignificant. As far as growth regression is concerned, it seems that there is a positive relationship between openness and growth for all countries. More specific, for developing countries trade openness has a negative effect on income per capita and a positive one on income growth. On the other hand, a negative relationship between openness and income per capita and income growth presented in our results for developed countries.