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    This document analyzes the correlation between different measures of trade openness using data from 1980 to 2004. It finds that while revenue tariffs and statutory tariffs differ in magnitude, they are highly correlated at 0.63. Both measures are negatively correlated with trade shares, with correlations between -0.2 and -0.3, indicating that higher tariffs are associated with lower trade volumes relative to GDP. The different openness measures are all significantly correlated with one another to some degree.

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    File 0087 PDF

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    This document analyzes the correlation between different measures of trade openness using data from 1980 to 2004. It finds that while revenue tariffs and statutory tariffs differ in magnitude, they are highly correlated at 0.63. Both measures are negatively correlated with trade shares, with correlations between -0.2 and -0.3, indicating that higher tariffs are associated with lower trade volumes relative to GDP. The different openness measures are all significantly correlated with one another to some degree.

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    This document analyzes the correlation between different measures of trade openness using data from 1980 to 2004. It finds that while revenue tariffs and statutory tariffs differ in magnitude, they are highly correlated at 0.63. Both measures are negatively correlated with trade shares, with correlations between -0.2 and -0.3, indicating that higher tariffs are associated with lower trade volumes relative to GDP. The different openness measures are all significantly correlated with one another to some degree.

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    54 views1 page

    File 0087 PDF

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    Ed Z
    This document analyzes the correlation between different measures of trade openness using data from 1980 to 2004. It finds that while revenue tariffs and statutory tariffs differ in magnitude, they are highly correlated at 0.63. Both measures are negatively correlated with trade shares, with correlations between -0.2 and -0.3, indicating that higher tariffs are associated with lower trade volumes relative to GDP. The different openness measures are all significantly correlated with one another to some degree.

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    4082 Ann Harrison and Andrés Rodríguez-Clare

    Table 3 All countries

    Correlation between different openness measures


    Revenue tariffs Openness
    Exchange Statutory Real
    (Trade taxes/ (X þ M/ DFI/GDP
    rate Tariffs openness
    Trade volumes) GDP)

    Revenue tariffs 0.0452 1.0000


    (Trade taxes/ 283 919
    Trade volumes)
    Statutory Tariffs !0.0314 0.6271# 1.0000
    274 666 716
    Openness !0.0172 !0.2459# !0.2470# 1.0000
    (X þ M/GDP) 291 561 464 607
    Real openness !0.0662 !0.2200# !0.2970# 0.8921# 1.0000
    293 579 461 566 630
    DFI/GDP !0.0066 !0.2501# !0.3016# 0.3708# 0.4129# 1.0000
    281 559 445 567 576 607

    Notes: Data from World Bank. Time period includes 1970–2004. The asterisk indicates significant at the 5% level.
    Number of observations are underneath correlation coefficient.

    distance to neighbors and trading partners, country size, exchange rate movements,
    terms of trade changes, and barriers to entry. Consequently, simply using trade volumes
    to proxy for changes in trade policies may be misleading. We evaluate the relationship
    between these different openness measures in Table 3. We present correlations
    between statutory tariffs, trade taxes as a percentage of trade, two measures of trade
    volumes, the nominal exchange rate, and the ratio of foreign investment inflows to
    GDP using annual data from 1980 to 2004. For trade shares, we include both nominal
    and real trade shares, where real trade shares are defined as the ratio of trade to GDP in
    constant prices from the Penn World Tables (version 6.1). Table 4 repeats the same
    exercise, but restricts the sample to developing countries. The correlations reported
    in Tables 3 and 4 highlight the following:
    • Although Table 2 indicates a big difference in magnitude between the ratio of
    tariff revenues to trade and statutory tariffs, the correlation coefficient reported in
    Table 3 between the two measures is actually quite high at 0.63 and statistically
    significant.
    • There is a significant negative correlation between trade shares and tariffs. The cor-
    relation with nominal openness is !0.25. The correlation with real openness about
    the same, between !0.2 and !0.3, depending on which measure of tariffs is used.

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