How Robust Is the Growth-Openness Relationship to the Inclusion of Standard Control Variables?A Cross-Country Study over the Period 1970-2000

The objective of this work is to investigate the robustness of the relationship betweenopenness and growth to the inclusion of standard control variables. To this end, we use data on aset of countries over the period 1970-2000 to estimate an augmented Solow regression model, inwhich a measure of openness, due to Sachs and Warner (1995a), along with other variables, foundto be robust in growth regressions based on different statistical criteria, are included. Among theindicators used to control the relationship between growth and openness in our regressions, wemention the black market premium, the share of primary goods exports to real GDP , the terms oftrade volatility, and governance and institutions. The results obtained show that openness isgenerally positively linked with growth. The magnitude of the effect of openness on per capitaGDP growth, and its statistical significance, depend, however, crucially on the controllingvariable(s) being used.