Abstract

This study investigates the impact of market size on how trade openness affects economic growth. A panel data of 60 developing countries is used and two measures of trade openness are interacted with four measures of market size. Although the interactive terms by themselves do not appear to be significant but the two measures of trade openness are positive and significant. Their positive impact on economic growth is generally robust in the presence of the measures of market size. Moreover, OLS estimation using both cross section and period fixed effects seems to be superior to using cross section fixed effects only.

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