Openness can be good for growth : the role of policy complement aries /
Roberto Chang,, Linda Kaltani, Norman Loayza.
- Washington, D. C : World Bank, 2005.
- 40p ; 27 cm.
- Policy research working papers ; no. 3763 .
Also available online. "The authors study how the effect of trade openness on economic growth depends on complementary reforms that help a country take advantage of international competition. This issue is illustrated with a simple Harris-Todaro model where output gains after trade liberalization depend on the degree of labor market flexibility. In that model, trade protection may ameliorate the problem of underemployment (and underproduction)in sectors affected by labor market distortions. Hence, trade liberalization unambiguously increases per capita income only when labor markets are sufficiently flexible. The authors then present some panel evidence on how the growth affect of openness depends on a variety of structural characteristics. For this purpose, they use a non-linear growth regression specification that interacts a proxy of trade openness with proxies of educational investment, financial d