Trade Openness and Growth: Who Benefits?

We investigate the relationship between economic growth andforeign trade, testing whether the benefits of trade vary overtime and across countries. Our results confirm previous findingsthat specialization in primary exports is bad for growth. Whiletrade openness promoted convergence in the 1960s and 1970s,we find that since 1980 the benefits of trade accrued mostlyto the richer economies, with little benefit to the less developedeconomies. Most of the dynamic benefits of trade are obtainedthrough productivity growth, with a small contribution comingthrough increased investment.