Trade Openness and Growth: Who Benefits?

Abstract

We investigate the relationship between economic growth and foreign trade, testing whether the benefits of trade vary over time and across countries. Our results confirm previous findings that specialization in primary exports is bad for growth. While trade openness promoted convergence in the 1960s and 1970s, we find that since 1980 the benefits of trade accrued mostly to the richer economies, with little benefit to the less developed economies. Most of the dynamic benefits of trade are obtained through productivity growth, with a small contribution coming through increased investment.