Comments on ‘ Productivity convergence and international openness ’ (
نویسندگان
چکیده
This Chapter studies the economic mechanism relating (i) growth and (ii) openness to trade. It investigates how openness to economic exchange influences total factor productivity (TFP) convergence across economies. This Chapter stands as the natural limit point of the sequence of findings reported in earlier Chapters. At the Conference, we had previously seen correlations and tabulations and distribution-dynamic characterizations all suggesting a positive connection between (i) and (ii) above. Arriving at this Chapter, the reader is primed for the payoff. When does openness to trade induce higher economic growth and improved productivity? What is the economic mechanism that makes this work? The reader is ready to see all kid gloves taken off, and the findings laid bare. Indeed, the Chapter does not disappoint. It provides a simple partial-equilibrium economic model showing how a less advanced economy might " catch up " with a more advanced one through technology transfer. It studies the predictions of that model through a range of panel data econometric analysis. The key finding is that openness to trade improves matters for the follower economy, and TFP convergence can occur. But there are limits. Even in the very long run, if nothing else were to change and the convergence process were to continue, TFP in the UK (the less advanced economy, in this instance) will remain permanently behind that of the leading economy. The central empirical result is, to be clear, more precise than what I have just stated. Openness to trade matters for the speed with which TFP convergence occurs: The more open is the less advanced
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