The effects of openness, trade orientation, and human capital on total factor productivity

Abstract

We study the effects of openness, trade orientation, and human capital on total factor productivity for a pooled sample of developed and developing countries. Total factor productivity emerges from a parsimonious specification of the aggregate production function. Potential determinants of total factor productivity include measures of openness, trade orientation, and human capital. Higher openness benefits total factor productivity. Outward-oriented countries experience higher total factor productivity, over and above the positive effect of openness. Human capital generally contributes positively to total factor productivity. In poor countries, however, human capital interacts with openness to achieve a positive effect.