Understanding economic openness: a review of existing measures
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Understanding economic openness: a review of existing measures Claudius Gräbner1,2 · Philipp Heimberger1,3 · Jakob Kapeller1,2 · Florian Springholz1
© The Author(s) 2020
Abstract This paper surveys measures of economic openness, the latter being understood as the degree to which non-domestic actors can or do participate in a domestic economy. Based on the existing literature, the authors introduce a typology of openness indicators, which distinguishes between ‘real’ and ‘financial’ openness as well as ‘de-facto’ and ‘de-jure’ measures of openness. They use data collected on these indicators to analyze trends in openness over time and to conduct a correlation analysis across indicators. Finally, they illustrate the potential consequences of employing different openness measures in a growth regression framework. Keywords Economic openness · Trade openness · Financial openness · Globalization JEL Classification F00 · F40 · F60
1 Introduction The impact of economic openness on domestic economies has been a prime area of interest within both the scientific community as well as the wider public. The relevant debates, however, use a great diversity of concepts to describe the extent of international economic integration: terms like ‘trade openness’, ‘economic Electronic supplementary material The online version of this article (https://doi.org/10.1007/s1029 0-020-00391-1) contains supplementary material, which is available to authorized users. * Claudius Gräbner claudius@claudius‑graebner.com 1
Institute for the Comprehensive Analysis of the Economy (ICAE), Johannes Kepler University Linz, Linz, Austria
2
Institute for Socio‑Economics, University of Duisburg-Essen, Duisburg, Germany
3
Vienna Institute for International Economic Studies (wiiw), Vienna, Austria
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integration’, ‘trade liberalization’ and ‘globalization’ are widely used when the general increase in economic openness during the last decades is addressed. The same observation holds true for the financial dimension, where terms like ‘financial openness’, ‘financial integration’ and ‘financial globalization’ are used regularly and often interchangeably (e.g., Kose et al. 2009; De Nicolo and Juvenal 2014; Saadma and Steiner 2016). In analogy to this variety of terms and concepts, a large variety of measures of economic openness have been developed. These measures typically emphasize different aspects of economic integration. As a consequence, not only the definition, but also the measurement of openness has varied considerably over the past three decades and a corresponding lack of consensus on how to best measure economic openness has been widely acknowledged (e.g. Yanikkaya 2003; Squalli and Wilson 2011; Busse and Koeniger 2012; Huchet-Bourdon et al. 2017; Egger et al. 2019). At the same time, many econometric studies discount the underlying debate on the measurement of economic openness by simply employing the most popular measures without any in-depth explanations or justifications for doing so. Ag
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