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Correcting the Size Bias in Trade Openness and Globalization Measures

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  • Tang Kam Ki.

    (The University of Queensland)

Abstract

The trade intensity index, constructed as exports plus imports divided by GDP, is the most commonly used measure for trade openness and globalization. The index tends to indicate small countries are more open than large countries. We show that it is the inconsistence of two implicit assumptions in the index that leads to a size bias in the openness measurement. We use a combination of axiomatic and parametric methods to derive an unbiased, generalized index that embodies the conventional index as a special case. Correcting the size bias leads to very different results in relative openness measures between countries and in the estimates of the growth effect of trade openness.

Suggested Citation

  • Tang Kam Ki., 2011. "Correcting the Size Bias in Trade Openness and Globalization Measures," Global Economy Journal, De Gruyter, vol. 11(3), pages 1-26, September.
    • Handle: RePEc:bpj:glecon:v:11:y:2011:i:3:n:3
    DOI: 10.2202/1524-5861.1751
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    References listed on IDEAS

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    1. Kan Li & Randall Morck & Fan Yang & Bernard Yeung, 2004. "Firm-Specific Variation and Openness in Emerging Markets," The Review of Economics and Statistics, MIT Press, vol. 86(3), pages 658-669, August.
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    Cited by:

    1. Claudius Graebner & Philipp Heimberger & Jakob Kapeller & Florian, 2018. "Measuring Economic Openness: A review of existing measures and empirical practices," ICAE Working Papers 84, Johannes Kepler University, Institute for Comprehensive Analysis of the Economy.
    2. Claudius Gräbner & Philipp Heimberger & Jakob Kapeller & Florian Springholz, 2021. "Understanding economic openness: a review of existing measures," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 157(1), pages 87-120, February.
    3. Claudius Gräbner & Philipp Heimberger & Jakob Kapeller & Florian Springholz, 2018. "Measuring Economic Openness," wiiw Working Papers 157, The Vienna Institute for International Economic Studies, wiiw.
    4. Margarita Navarro-Pabsdorf & Eduardo Cuenca-Garcia & Estela Quiros-Gonzalez, 2024. "The Impact of Foreign Trade in the Graduation Process of Asian Least-Developed Countries (LDCs)," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 15(3), pages 13745-13779, September.

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