The commonly observed positive relationship between openness and growth is consistent with many theories of economic growth and thus does not provide direct evidence in support of any one of them. Quah and Rauch (1990), however, imply that increased specialization accelerated productivity growth by more fully realizing dymanic economies of scale. We use dynamic panel estimation to test this hypothesis by examining specialization in thirty-five countries. We show that in the less developed countries specialization is positively and significantly correlated with increased manufacturing productivity growth, even when variables, such as openness, inflation, government spending, and investment are controlled for
To submit an update or takedown request for this paper, please submit an Update/Correction/Removal Request.