The Import of Trade Openness on Economic Growth

Many economists generally agree that openness accelerates economic development. This study explores the relationship between trade openness and economic growth using a sample of 71 developing countries over the period 1990 – 2005. Incorporating an augmented Solow growth model in a panel data analysis, both fixed and two-way fixed effects specifications indicate that trade liberalization has a positive and significant effect on economic growth. However, the Sub-Saharan Africa region does appear to be different; high natural barriers to trade, export dependence on primary commodities and poor overland infrastructures to distant large markets can explain why increased trade openness does not contribute to economic growth.