What Does Trade Openness Measure?

Arbeitspapier

An empirical measure of trade openness is defined as the ratio of total trade to GDP, and represents a convenient variable routinely used for cross-country studies on a variety of issues. However, the effects that the crude measure captures remain ambiguous, making it difficult to interpret the empirical results. Drawing on several strands of the literature, this study examines the informational content of the trade openness measure using intranational and international data. We find that, even for fully integrated economies within a country, trade openness is approximately half as variable as it is for segmented diverse countries around the world. The information it conveys is better characterized as the extent of the economic remoteness and idiosyncratic distribution of sectoral production. The cross-country variation of trade openness derives more from the variability in GDP than trade.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 6656

Classification and Topics

• Classification: Wirtschaft ; Macroeconomic Aspects of International Trade and Finance: General ; Empirical Studies of Trade
• Subject: trade openness ; specialization ; gravity model ; market integration ; price deviations ; remoteness

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Fujii, Eiji
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2017

Further information

• Handle: http://hdl.handle.net/10419/171120
• Last update: 10.03.2025, 11:44 AM CET