GEP Research Paper 03/32
Threshold and Interaction Effects in the Openness-Productivity Growth Relationship: The Role of Institutions and Natural Barriers
Sourafel Girma, Michael Henry, Richard Kneller and Chris Milner
Abstract
This paper explores heterogeneity in the openness-productivity growth relationship, specifically whether the productivity payoffs from openness or trade liberalisation are conditioned by the quality of a country's institutions and the extent of natural barriers. The paper endogenously searches for the type of heterogeneity; what variable might be used to capture the heterogeneity and with what level of certainty can we attach to it. Evidence is found to suggest there is a threshold in the effect of openness on growth that depends on the level of natural barriers but not institutions. These results are robust to the use of alternative indicators.
Issued in September 2003.
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