Economies in Transition: How Important Is Trade Openness for Growth?∗

We investigate the effect of trade openness on economic growth in transition coun-tries using a transparent statistical methodology that leads to data-driven case studies. In particular, we employ synthetic control methods in a panel of transi-tion economies and compare GDP growth in treated (that is, open) countries with growth in a convex combination of similar but untreated (that is, closed) countries. We find that trade liberalization tends to have a positive effect on the pattern of real GDP per capita. One of our most robust results shows that making the transition without opening up to trade considerably hampers growth