Institutions, openness and economic growth

Abstract

This paper discusses the channels through which institutions and trade openness affect economic growth. Institutions and trade openness positively contribute to economic growth as they generate positive technological externalities apart from their direct contribution growth. However, the possible feedbacks between institutions and openness are considered to obtain unbiased estimates. Empirical results obtained using panel techniques for cross-country data support this claim. Economies with relatively good institutions and greater trade openness tend to grow rapidly. JEL Classification No.: F1, F2, 04