Empirical Evidence on the Relationship between Trade Openness and Economic Growth

This paper examines the impact of trade openness on economic growth using a new measure of trade openness proposed by Squalli1 and Wilson (2011). In contrast to the vast majority of the existing literature, the new measure of trade openness accounts for not only the country trade share of its GDP but also the relative size of the country's trade compared to the world trade in a given year. Using this innovative way to measure openness, the current essay examines the impact of trade openness on economic growth. We use data set includes 182 countries and covers the period from 1971 to 2011. We employ the Common Correlated Effects Mean Group (CCEMG) estimator developed by Pesaran (2006) and applied Cavalcanti et al. (2011) which takes into consideration the heterogeneity nature of world countries