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Things are different when you open up: Economic openness, domestic economy, and income

Beja, Edsel (2009): Things are different when you open up: Economic openness, domestic economy, and income.

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Abstract

“Does economic openness increase income?” is retested using quantity measures of trade, finance, and domestic economic size, and the short answer is: “It de-pends”. The results show that Africa and the Americas lose from both trade and financial openness, while Asia gains from trade openness but loses from financial openness. The industrialized region benefits from both trade and financial open-ness. In all regions, the domestic base compensates for any adverse effects of economic openness. The overall experience of economies with openness can be enhanced with healthier external and domestic engagements. The case study on the Philippines finds that the country gains from trade and financial openness but not from the domestic base. In this case, economic progress is difficult because the gains from external engagement are wiped out by the losses from domestic economy disengagement.

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