Working Paper No. 63
By James Proudman, Stephen Redding and Marco Bianchi
This paper considers the role of international openness in facilitating income convergence within a model of distribution dynamics. Discriminate analysis is used to sort economies into open and closed groups, and the evolution of the cross-section income distribution modelled for both the whole world and open/closed economies separately. Open economies are found to exhibit substantially different income dynamics and to converge to different levels of income to their closed economy counterparts, differences that remain even after conditioning on relative investment levels.Is International Openness Associated with Faster Economic Growth?