Openness and Growth in South Asia

The determinants of economic growth have long been a subject for economists, historians and sociologists. Traditionally, economic growth has been attributed to physical factors of production like labor and capital but, in the past few decades, there has been a search going on for the part of growth that remains unexplained when the physical factors of production are accounted for. At least two third of economic growth cannot be attributed to the physical factors of production. Several other factors contributing to economic growth have been highlighted in the recent past. Such factors include human capital, increasing returns to scale and openness. Openness of the economy is thought to be an important part of the equation of growth and there are a large number of studies and estimation using a large number of cross-sectional datasets. Time series models have been applied to single country analysis in South Asia. However, in the present paper, focusing on the three largest economies of South Asia, the authors apply, along with several other models, a panel data model to a panel dataset of India, Pakistan and Bangladesh for the period of 1980 to 2008. The results confirm that openness played an important part in the economic growth of South Asia during the period 1980-2008.