Trade Openness and Volatility



2.2 Data and Summary Statistics

Data on industry-level production, quantity indices, employment, and prices come from the
2005 UNIDO Industrial Statistics Database. We use the version that reports data according
to the 3-digit ISIC Revision 2 classification for the period 1963-2002 in the best cases.
There are 28 manufacturing sectors in total, plus the information on total manufacturing.
We use data reported in current U.S. dollars, and convert them into constant international
dollars using the Penn World Tables (Heston, Summers and Aten 2002).
11 We also correct
inconsistencies between the UNIDO data reported in U.S. dollars and domestic currency.
We dropped observations which did not conform to the standard 3-digit ISIC classification,
or took on implausible values, such as a growth rate of more than 100% year to year. We also
removed countries for which the production data and the trade data were not conformable.
The resulting dataset is an unbalanced panel of 59 countries, but we insure that for each
country-year we have a minimum of 10 sectors, and that for each country, there are at least
10 years of data.

We combine information on sectoral production with international trade flows from the
World Trade Database (Feenstra et al. 2005). This database contains bilateral trade flows
between some 150 countries, accounting for 98% of world trade. Trade flows are reported
using the 4-digit SITC Revision 2 classification. We convert the trade flows from SITC
to ISIC classification and merge them with production data.
12 The final sample is for the
period 1970-99, giving us three full decades.

Appendix Table A1 reports the list of countries in our sample, along with some basic
descriptive statistics on the average growth rate of output per worker in the manufactur-
ing sector, its standard deviation, its import penetration, and the share of output that is
exported. There is some dispersion in the average growth rates of the manufacturing out-
put per worker, with Tanzania at the bottom with a mean growth rate of
-3.2% per year
over this period, and Pakistan at the top with 5.8% per year. There are also differences in
volatility, with the United States having the least volatile manufacturing sector, and Sene-
gal the most. Import penetration and the share of total manufacturing production that
gets exported vary a great deal across countries. Appendix Table A2 lists the sectors we
use in the analysis, along with the similar descriptive statistics. Growth rates of output per
worker across sectors are remarkably similar, ranging from roughly 1% per year for leather
products to 4% for industrial chemicals. We can see that individual sectors have much
11Using the variable name conventions from the Penn World Tables, this deflation procedure involves mul-
tiplying the nominal U.S. dollar value by (100
/P) * (RGDPL/CGDP) to obtain the constant international
dollar value.

12 The merge is based on the concordance found on the International Trade Resources website maintained
by Jon D. Haveman:
http://www.haveman.org.



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