Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/171120
Authors: 
Fujii, Eiji
Year of Publication: 
2017
Series/Report no.: 
CESifo Working Paper 6656
Abstract: 
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.
Subjects: 
trade openness
specialization
gravity model
market integration
price deviations
remoteness
JEL: 
F40
F14
Document Type: 
Working Paper

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