Trade Openness and Economic Growth

Evidence in East Asia and Latin America

The past two decades have witnessed economic growth differentials among countries in East Asia and Latin America. In this paper we argue that the degree of openness due to government policies in both areas may be an important factor yielding this result. We construct a simple model to highlight a positive association between trade openness and economic growth, and then use a sample of thirty-four countries in the area to test the relationship, after controlling for other common variables of economic growth. As there is no universal harmonious measure of openness, we use an array of five measures, including quantitative, price and qualitative measures. The empirical results are supportive of our conjecture, both in significance and in magnitude. (JEL classification: Fl, 01, 04, 057.)