Author(s): Andreas Billmeier and Tommaso Nannicini
We use a transparent statistical methodology for data-driven case studies-synthetic control methods-to investigate the impact of economic liberalization episodes on the pattern of real per capita GDP in a worldwide sample of countries. Economic liberalizations are measured by a widely used indicator that captures the scope of the market in the economy, mainly in terms of openness to international trade. The applied methodology compares the post- liberalization growth of treated (open) economies with the growth of a convex combination of similar but untreated (closed) economies, controlling for time-varying unobservables. We find that opening up the economy had a positive effect in most regions that we can analyze in our framework, but we note that more recent liberalizations (after 1990), mainly in Africa, had no significant impact on growth, indicating an early bird gain from globalization.
Keywords: conomic liberalization, trade openness, growth, synthetic control methods
JEL codes: C21, C23, F43, O57