Openness, Specialization, and Productivity Growth in Less Developed Countries
Author(s)
Weinhold, Diana; Rauch, James E.
Abstract
The commonly observed positive relationship between openness and growth is consistent with many theories of economic growth and thus does not provide direct evidence in support of any one of them. Quah and Rauch (1990), however, imply that increased specialization accelerates productivity growth by more fully realizing dynamic economies of scale. Dynamic panel estimation is used to test this hypothesis by examining specialization in 35 countries. It is shown that in the less developed countries specialization is positively and significantly correlated with increased manufacturing productivity growth, even when variables, such as openness, inflation, government spending, and investment are controlled.
