In the paper called “The Relationship Between Trade Openness and Economic Growth: Some New Insights on the Openness Measurement Issue” Hutchet-Bourdon, Le Mouël, and Vijil (2011) discover aspects of measuring trade openness and its impact on economic growth. The review of the existing literature reveals the lack of a precise definition of the concept of trade openness. Consequently, further measurement of trade openness and its influence depends on these different definitions.
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The research question of the study under analysis is to discover the relationship between trade openness and economic growth and reveal some new ideas related to measuring trade openness. According to Hutchet-Bourdon et al. (2011), quality and diversification should be considered in developing a more efficient way of openness measurement. The researchers extend the model of Frankel and Rose considering the major indicators of trade openness which comprise “trade dependency ratio, export quality index and export variety index” (Hutchet-Bourdon et al., 2011, p. 6).
The authors apply a generalized method of moments (GMM) estimation approach which is created for dynamic panel data models. Its primary purpose is to deal with biases that appear in case variables are omitted (Hutchet-Bourdon et al., 2011). The methodology was applied to annual data for an unbalanced panel taken from 157 countries.
The Main Findings
One of the major findings of the research is proof of the more rapid growth of the countries that export higher quality products and those that export more diversified goods. Also, the researchers found out that the influence of the trade dependency ratio has a non-linear character. It means countries that export slightly diversified products or goods of low quality have lower or negative ratios.
Contribution of the Research
The research contributes to the existing literature on the issue of trade openness and economic growth. First of all, the researchers provide arguments to the discussion of trade openness and the fact that it cannot be summarized “to a single measure such as the most commonly used trade share” (Hutchet-Bourdon et al., 2011, p. 5). The second contribution is the introduction of new insights regarding the relationship between trade and growth that emerged recently. Finally, the researchers suggest a better-developed way that can be used for measuring openness which considers quality and diversification as additional aspects that are important for world trade integration.
The researchers conclude that the results of their study reveal the relationship between trade openness and growth and prove that it is not simple. Consequently, they suggest considering additional factors during this measurement and providing a more careful definition of the concept of trade openness measurement.
Hutchet-Bourdon, M., Le Mouël, C., & Vijil, M. (2011). The relationship between trade openness and economic growth: Some new insights on the openness measurement issue. Web.
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