Pritchett (1996) has raised doubts on whether researchers have adequately measured
openness. In Pritchett (1999) he has examined the correlations between a number of
measures of openness to see if they were capturing some common aspect of trade policy or
openness and found that the link between various empirical indicators are pair-wise
uncorrelated. This finding raises questions about their reliability in capturing some common
aspect of trade policy and the interpretation of the empirical evidence. Hence, his findings
cast a doubt on the interpretation of the empirical evidence on openness and economic
growth.
Dollar (1992) found that outward oriented economies as well as high exports and the
sustainability of imported goods and machinery accelerate growth.2 Barro and Sala-i-Martin
(1995), Sachs and Warner (1995), Edwards (1998), Greenaway, Morgan, and Wright (1998),
and Vamvakidis (1998) show, with cross-country regressions, that trade protection reduces
growth rates. Ben-David (1993), and Sachs and Warner (1995) show that only open
economies experience unconditional convergence. Quinn (1997) proposed an openness
indicator based upon a coding of the domestic and international laws of 64 nations, most of
whose legislation is available from 1950 to 1994. The results suggest that capital account
deregulation may contribute to economic growth and investment. Frankel and Romer (1999)
provide instrumental variables estimates and confirm a significant and robust positive
impact of trade on growth, using cross-country geographic indicators. Brunner (2003)
extended Frankel and Romer’s (1999) cross-sectional approach to panel estimation and
found a significant positive impact of trade on income.
On the contrary, Rodriguez and Rodrik (2000) challenge the robustness of the
openness-growth correlations found by Dollar (1992), Ben-David (1993), Sachs and Warner
(1995), and Edwards (1998). They argue that some of these studies did not control for other
important growth indicators and that important drawback is their usage of the openness
measures. However, Warner (2002) refuted the argument of Rodriguez and Rodrik (2000).
His results re-established the positive growth-openness link. In fact, Warner (2002) argued
2 Recently, Subasat (2003) demonstrates that the index developed by Dollar (1992) has fundamental flaws and
therefore has no relevance to the debate on trade orientation and should be abandoned.