DP17230 Measuring Openness
|Author(s):||Jean Imbs, Laurent Pauwels|
|Publication Date:||April 2022|
|Keyword(s):||global value chains, growth, Instrumenting Openness, Measurement of Openness, Productivity, shock propagation, Synchronization|
|JEL(s):||C80, F15, F44, F62|
|Programme Areas:||International Trade and Regional Economics, International Macroeconomics and Finance, Macroeconomics and Growth|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=17230|
We introduce a measure of exposure to foreign shocks -openness- that computes the fraction of output subjected to foreign shocks at any order. The measure is easy to obtain for any sector with input-output data; It implies that openness is much more prevalent than often thought, especially in services. Theoretically the new measure correlates systematically with the response of productivity to foreign shocks because it reflects high order linkages in output (rather than trade). Empirically it also correlates highly with productivity in an international sample of sector level data. None of these conclusions are true for conventional measures of openness.