Globalisation and Aggregate Productivity Growth

  • Michael Henry
  • Chris Milner


The relationship between trade openness and growth is a contentious issue. Advocates of free trade and outward oriented trade policies have advanced both theoretical and empirical evidence demonstrating that greater openness results in better long-run economic performance, measured either in terms of higher per capita gross domestic product (GDP) or total factor productivity (TFP) growth. However, there are some researchers who remain sceptical in the face of this evidence. There are a number of issues which lie at the heart of the controversy. The first relates to the suitability of the indices commonly used in empirical trade and growth studies to proxy a country’s trade regime (Edwards, 1993; Rodrik, 1995; Rodriguez and Rodrik, 2000). For example, Rodrik (1995) argues that in most studies of openness and growth, ‘the trade regime indicator is typically measured very badly’ and ‘openness in the sense of lack of trade restrictions is often confused with macroeconomic aspects of the policy regime’ (p. 2941). Additionally, Pritchett (1996) finds that the commonly used trade policy measures are uncorrelated among themselves. The second, is the lack of good quality trade policy information with broad country and time coverage, particularly for developing countries, to construct satisfactory measures of trade policy (Edwards, 1998; Harrison and Hanson, 1999; Baldwin, 2003).


Human Capital Gross Domestic Product Trade Policy Trade Openness Capita Gross Domestic Product 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.


Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.


  1. Baldwin, Robert (2003), ‘Openness and Growth: What’s the Empirical Relationship?’, NBER Working Paper 9578.CrossRefGoogle Scholar
  2. Benhabib, Jess and M. Spiegel (1994), ‘The Role of Human Capital in Economic Development: Evidence from Aggregate Cross-Country Data’, Journal of Monetary Economics, 34(2), 143–73.CrossRefGoogle Scholar
  3. Collins, Susan and B. Bosworth (1996), ‘Economic Growth in East Asia: Accumulation Versus Assimilation’, Brookings Papers on Economic Activity, 2, 135–91.CrossRefGoogle Scholar
  4. Dollar, David (1992), ‘Outward-Oriented Developing Economies Really Do Grow More Rapidly: Evidence from 95 LDCs, 1976–1985’, Economic Development and Cultural Change, 40(3), 523–44.CrossRefGoogle Scholar
  5. Dollar, David and Art Kray (2001), ‘Trade, Growth and Poverty’, Downloadable from
  6. Edwards, Sebastian (1992), ‘Trade Orientation, Distortions and Growth in Developing Countries’, Journal of Development Economics, 39, 31–57.CrossRefGoogle Scholar
  7. Edwards, Sebastian (1993), ‘Openness, Trade Liberalization, and Growth in Developing Countries’, Journal of Economic Literature, XXXI(3), 1358–93.Google Scholar
  8. Edwards, Sebastian (1998), ‘Openness, Productivity and Growth: What Do We Really Know?’ The Economic Journal, 108, 383–98.CrossRefGoogle Scholar
  9. Felipe, Jesus (1999), ‘Total Factor Productivity Growth in East Asia: A Critical Survey’, Journal of Development Studies, 35(4), 1–41.CrossRefGoogle Scholar
  10. Fischer, Stanley (1993), ‘The Role of Macroeconomic Factors in Growth’, Journal of Monetary Economics, 32, 485–512.CrossRefGoogle Scholar
  11. Greenaway, David, Wyn Morgan and Peter Wright (2002), ‘Trade Liberalisation and Growth in Developing Countries’, Journal of Development Economics, 67, 229–44.CrossRefGoogle Scholar
  12. Harrison, Ann (1996), ‘Openness and Growth: A Time-Series, Cross-Country Analysis for Developing Countries’, Journal of Developing Economies, 48, 419–47.CrossRefGoogle Scholar
  13. Harrison, Ann and G. Hanson (1999), ‘Who Gains from Trade Reform? Some Remaining Puzzles’, Journal of Development Economics, 59, 125–54.CrossRefGoogle Scholar
  14. Levine, Ross and David Renelt (1992), ‘A Sensitivity Analysis of Cross-country Growth Regressions’, American Economic Review, 82(4), 942–63.Google Scholar
  15. Miller, Stephen M. and Mutki P. Upadhyay (2000), ‘The Effects of Openness, Trade Orientation, and Human Capital on Total Factor Productivity’, Journal of Development Economics, 69, 399–423.CrossRefGoogle Scholar
  16. Nelson, Richard and Howard Pack (1999), ‘The Asian Growth Miracle and Modern Growth Theory’, Economic Journal, 109, 416–36.CrossRefGoogle Scholar
  17. Pesaran, M.H. and R. Smith (1995), ‘Estimating Long-run Relationship from Dynamic Heterogeneous Panels’, Journal of Econometrics, 68, 79–112.CrossRefGoogle Scholar
  18. Pritchett, Lant (2001), ‘Measuring Outward Orientation in Developing Countries: Can it be Done?’, Journal of Development Economics, 49(2), 307–35.CrossRefGoogle Scholar
  19. Rodriguez, Francisco and Dani Rodrik (2000), ‘Trade Policy and Economic Growth: A Skeptic’s Guide to the Cross-National Evidence’. Downloadable from http://www// Google Scholar
  20. Rodrik, Dani (1995), ‘Trade Policy and Industrial Policy Reform’, in Jere Behrman and T.N. Srinivasan, eds Handbook of Development Economics, 3B, Amsterdam: North Holland.Google Scholar
  21. Sachs, Jeffrey and Andrew Warner (1995), ‘Economic Reform and the Process of Global Integration’, Brookings Papers on Economic Activity, 1, 1–118.CrossRefGoogle Scholar
  22. Sala-i-Martin, Xavier (1997), ‘I Have Just Ran Two Million Regressions’, American Economic Review, 87(2), 178–83.Google Scholar
  23. Söderbom, M. and F. Teal (2001), ‘Trade and Human Capital as Determinants of Growth’, WPS 2001–10, CSAE, University of Oxford.Google Scholar
  24. Summers and Heston (1995), ‘The Penn World Tables (Mark 5.6)’, World Development Indicators CD ROM 2000, World Bank.Google Scholar
  25. Wacziarg, Romain (2001), ‘Measuring the Dynamic Gains from Trade’, The World Bank Economic Review, 15(3), 393–429.CrossRefGoogle Scholar
  26. Young, Alwyn (1995), ‘The Tyranny of Numbers: Confronting the Statistical Realities of the East Asian Growth Experience’, Quarterly Journal of Economics, 110, 641–80.CrossRefGoogle Scholar

Copyright information

© Michael Henry and Chris Milner 2005

Authors and Affiliations

  • Michael Henry
  • Chris Milner

There are no affiliations available

Personalised recommendations