^*Andreas Billmeier is an economist in the IMF's Middle East and Central Asia Department. Tommaso Nannicini is an assistant professor of economics at Bocconi University; he is also affiliated with IGIER and IZA. Large parts of this paper were written while Nannicini was a visiting scholar at the IMF, and he would like to express his gratitude for the hospitality and support extended to him. An online appendix to this article is posted at http://www.tommasonannicini.eu/Portals/0/trade_matching_only_appendix.pdf. The authors would like to thank Guido Tabellini, Athanasios Vamvakidis, and Marla Ripoll for sharing their data; Klaus Enders, Christian Keller, Luca Ricci, Athanasios Vamvakidis, seminar participants at the IMF and ASSET 2007, and an anonymous referee for helpful suggestions; as well as David Einhorn, Anna Maripuu, and Judith Rey for their help with the data and editorial issues.

Abstract

Studies of the impact of trade openness on growth are based either on cross-country analysis—which lacks transparency—or case studies—which lack statistical rigor. This paper applies a transparent econometric method drawn from the treatment evaluation literature (matching estimators) to make the comparison between treated (that is, open) and control (that is, closed) countries explicit while remaining within a statistical framework. Matching estimators highlight that common cross-country evidence is based on rather far-fetched country comparisons, which stem from the lack of common support of treated and control countries in the covariate space. The paper therefore advocates paying more attention to appropriate sample restriction in cross-country macro research.