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Trade Openness and Economic Growth
Fuhmei Wang1 and Chien-Ju Liu2
Abstract
The literature overwhelmingly affirms that a positive relationship exists between trade openness and economic growth. Our conjecture here is that different indicators of trade openness might oppose this view. Based on endogenous growth model and different measures of trade openness, this paper attempts to investigate whether trade openness is necessarily positively associated with output growth. These indicators include trade dependency ratios, export share in GDP, import share in GDP, tax rates on imports, tax rates on exports, and the ratio of tax revenue on trade to total trade. Analytical results show that the exact relationship does not exist.
JEL classification: F12; F13
Keywords: Trade Openness, Endogenous Growth Theory, Technological Progress.
1.Corresponding Author, Department of Economics, National Cheng Kung University, 1, University Road, Tainan, Taiwan 701, Republic of China, E-mail: fmwang@mail.ncku.edu.tw, Tel: 886-6-2766491
2. Institute of Political Economy , National Cheng Kung University, 1, University Road, Tainan, Taiwan 701, Republic of China.
Acknowledgments
We thank referees and the editor for comments on an earlier draft. The financial support from National Science Council in Taiwan, under Contract NSC 92-2415-H-006-003 is herewith gratefully acknowledged. All errors are ours.
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