The Effects of Trade Openness on Economic Growth in the Developing Countries

Abstract

This study explores the empirical relationship between trade openness and economic growth in developing countries. The study utilizes panel data from 75 nations spanning from 2010 to 2022; the analysis employs pooled ordinary least squares, random effects, and fixed effects models to investigate the impact of trade on GDP per capita growth. The findings support the positive association between trade openness and economic growth in the developing countries. The results are robust to various control variables, including inflation, population growth, investment, education, and financial development. These findings align with theoretical predictions that trade liberalization can enhance economic growth. However, the study acknowledges limitations, such as the potential for omitted variable bias and data unavailability. Future research could overcome these shortcomings by incorporating additional control variables, expanding the sample size, and exploring the heterogeneous effects of trade across different country contexts.