Openness, Specialization and Growth

This paper explores the link between trade and growth showing how the relationship between openness and per capita income is con-tingent to the size and the level of export specialization of countries. Measuring openness both in terms of trade volumes and trade poli-cies, and specialization as a index of the position of the distribution of sectoral revealed comparative advantages, the paper- using paramet-ric and semiparametric panel data analysis- offers a precise taxonomy of the effects of openness on growth according to the size and the spe-cialization of countries. The effect of openness on growth is enhanced by the diversifica-tion of sectoral exports characterized by comparative advantages, and is reduced by the physical or economic dimension of the country con-sidered. The effect is however nonmonotonic: an increase in openness is relevant for growth at low levels of openness, specialization is effec-tive only at early stages of development, while is differentiation that enhances growth at higher levels of per capita income