Revisiting Squalli-Wilson’s Measure of Trade Openness in the Context of Services Trade


1 Department of Economics, Faculty of Arts, Social and Management Sciences, Federal University, Birnin Kebbi, Nigeria; Department of Economics, Faculty of Economics and Business, Universitas Airlangga, Surabaya, Indonesia

2 Department of Economics, Faculty of Economics and Business, Universitas Airlangga, Surabaya, Indonesia


This study re-examines Squalli-Wilson's measure of trade openness from the perspective of services. An attempt was made to compose all modes of services supply to form a composite measure of service openness that has rarely been used in trade literature. A global sample comprising different regions based on cross-country data was applied to test the reliability of this measure using correlation coefficients, income, and environmental quality models. Ordinary Least Square (OLS) and Two-Stage Least Square (2-SLS) Instrumental Variables approach were applied. Findings from the growth impact of trade are robust and consistent with prevailing literature supporting the positive impact of service trade on economic growth. However, our empirical estimate based on the two measures of environmental pollutants, shows that services openness reduces SO2 and increases CO2 emissions. These findings are consistent with most of the existing literature supporting the "gains from trade" hypothesis in the case of SO2 and the "pollution havens” hypothesis in the case of CO2 emissions. Nonetheless, the results provide further support in the context of services for the use of composite trade intensity proposed by Squalli-Wilson that not only considered trade/GDP ratio but also the relative importance of the country to the world trade. The inverted U-shaped EKC was also verified in both two measures of environmental pollutions. The policy implications of these findings are that care must be taken while increasing openness in areas of services to increase economic growth and to reduce the phenomenon of pollution haven in the case of CO2 emissions.


Aaditya, M., Randeep, R., & Subramanian, A. (2006). Measuring Services Trade Liberalization and its Impact on Economic Growth: An Illustration. Journal of Economic Integration, 21(1), 64-98.
Ades, A., & Di Tella, R. (1999). Rents, Competition, and Corruption. American Economic Review, 89(4), 982-993.
Adzido, R. Y., Hahiave, E. K., Kamasah, V. Y., Akoto, V., & Dorkpah, O. K. (2016). Assessing Financial Openness and Access to Credit Facilities: The Case of Banks in Ho, Ghana. International Journal of Academic Research in Accounting, Finance and Management Sciences, 6(3), 47-57.
Aizenman, J., & Noy, I. (2006). FDI and Trade-Two-Way Linkages? The Quarterly Review of Economics and Finance, 46(3), 317-337.
Alcalá, F., & Ciccone, A. (2004). Trade and Productivity. The Quarterly Journal of Economics, 119(2), 2613–646.
Alexander, K. (2012). The Influence of Services Trade Liberalization on Service Flows and Industry Productivity in CIS Countries and Russia Economic Education and Research Consortium Working Paper, E12/05E, Retrieved from
Antonio, C. D., & Montfort, M. A., Ashwin, M. (2014). Does Openness Matter for Financial Development in Africa? International Monetary Fund, Working Paper, WP/14/94, Retrieved from
Antonio, S., Juan, L. L., & Miguel, S. (1997). Income Distribution, Factor Endowments, and Trade Openness. Journal of Development Economics, 59(1), 77-101.
Antweiler, W., Copeland, B. R., & Taylor, M. S. (2001). Is Free Trade Good for the Environment? American Economic Review, 91(4), 877-908.
Asghari, M. (2010). The Stringency of Environmental Regulations and Technological Change: A Specific Test of the Porter Hypothesis. Iranian Economic Review, 5(27), 95-115.
Asghari, M. (2014). Economic Competitiveness and Environmental Policy: An Application of the Heckscher-Ohlin-Vanek (HOV) Model. Iranian Economic Review, 18(3), 27-44.
Assem, P., & Jefferey, H. A. (2000). Indicators of Economic Integration. Global Governance, 6(2000), 95-114.
Beverelli, C., Fiorini, M. & Hoekman B. (2017). Services Trade Policy and Manufacturing Productivity: The Role of Institutions. Journal of International Economics 104(2017), 166-182.
Chengsi, Z., Yueteng, Z., & Zhe, L. (2015). Trade Openness, Financial Openness, and Financial Development in China. Journal of International Money and Finance, 59(2015), 287-309.
Cherniwchan, J. (2017). Trade liberalization and the environment: Evidence from NAFTA and U.S. manufacturing. Journal of International Economics 105(2017), 130–149.
Chintrakarn, P., & Millimet, D. L. (2006). The Environmental Consequences of Trade: Evidence from Subnational Trade Flows. Journal of Environmental Economics and Management, 52(1), 430–453.
Edwards, S. (1998). Openness, Productivity, and Growth: What Do We Really Know? The Economic Journal, Volume 108(447), 383–398.
Fakhr, Z. S., & Sheikhbahaie, A. (2008). Openness, Growth, and Development: Evidence from a Panel of East Asian Countries. Iranian Economic Review, 13(22), 158-174.
Frankel, J. A., & Romer, D. H. (1999). Does Trade Cause Growth? American Economic Review, 89(3), 379-399.
Frankel, J. A., & Rose, A. K. (2005). Is Trade Good or Bad for the Environment? Sorting out the Causality. The Review of Economics and Statistics, 87(1), 85-91.
Gorgi, E., & Alipourian, M. (2008). Trade Openness and Economic Growth in Iran and Some OPEC Nations. Iranian Economic Review, 13(22), 31-40.
Greenaway, D., Morgan, W., & Wright, P. W. (2002). Trade Liberalisation and Growth in Developing Countries. Journal of Development Economics, 67(1), 229-244.
Halit, Y. (2003). Trade Openness and Economic Growth: A Cross-Country Empirical Investigation. Journal of Development Economics, 72(1), 57–89.
Harrison, A. (1996). Openness and Growth: A Time-Series, Cross-Country Analysis for Developing Countries. Journal of Development Economics, 48(1996), 419-447.
Hazem, A. S., & Chadi, A. (2016). The Effect of Financial Liberalization through the General Agreement on Trade and Services on Economic Growth in Developing Countries. International Journal of Economics and Financial, 6(3), 855-860.
Hosseini, S. M. (2014). An Empirical Study of Export and Economic Growth in India since 1960: A Co-integration Analysis. Iranian Economic Review, 18(1), 53-64.
Hu, H., Xie, N., Fang, D. & Zhang X. (2018). The Role of Renewable Energy Consumption and Commercial Services Trade in Carbon Dioxide Reduction: Evidence from 25 Developing Countries. Applied Energy, 211(2018), 1229–1244.
Hyun, H. S., & Nanak, K. (2008). Global Estimates of Pro-Poor Growth. World Development, 36(6), 1048-1066.
Jacob, M. W., & Yiheyisb, Z. (2015). The Impact of Trade Openness on Growth: The Case of Kenya. Journal of Policy Modelling, 37(2015), 342-354.
Jayanthakumaran, K., Verma, R., & Liu, Y. (2012). CO2 Emissions, Energy Consumption, Trade, and Income: A Comparative Analysis of China and India. Energy Policy, 42(2012), 450-460.
Karam, F., & Zaki, C. (2015). Trade Volume and Economic Growth in the MENA Region: Goods or Services? Economic Modelling, 45(2015), 22–37.
Kellenberg, D. K. (2008). A Re-examination of the Role of Income for the Trade and Environment Debate. Ecological Economics, 68(1-2), 106-115.
Kyrre, S. (2006). Trade Openness and Economic Growth: Do Institutions Matter? Norwegian Institute of International Affairs (NIIA), 702-2006, Retrieved from
Li, K., Mock, R., Yang, F., & Yeung, B. (2004). Firm-Specific Variation and Openness in Emerging Markets. Review of Economics and Statistics, 86(3), 658-669.
Lin, F. (2017). Trade Openness and Air Pollution: City-level Empirical Evidence from China. China Economic Review, 45(2017), 78–88.
Lloyd, P. J., & MacLaren, D. (2002). The Measure of Trade Openness Using CGE Analysis. Journal of Policy Modelling, 24(1), 67-81.
Maëlan, L. G., & Raju, J. S. (2014). Does Trade Reduce Poverty? A View from Africa. Journal of African Trade, 1(2014), 5-14.
Mahdavi, A., & Shamsiev, J. (2005). The Influence of Trade Openness on the Economic Growth of Former Soviet Union Countries. Iranian Economic Review, 10(12), 144-169.
Marcelo, O. (2016). Trade, Infrastructure, and Development. ADBI Working Papers 626, Asian Development Bank Institute, Retrieved from
Martin, R. (2019). Elevating Services: Services Trade Policy, WTO Commitments, and their Role in Economic Development and Trade Integration. Intergovernmental Group of Twenty Four-G-24, Working Paper, Retrieved from
Mattoo, A., Rathindran R. & Subramanian A. (2006). Measuring Services Trade Liberalization and Its Impact on Economic Growth: An Illustration. Journal of Economic Integration 21(1), 64-98.
Meng, Y., & Ni, X. (2011). Intra-Product Trade and Ordinary Trade on China’s Environmental Pollution (790–795). 3rd International Conference on Environmental Science and Information Application Technology (ESIAT 2011), Retrieved from Procedia Environmental Sciences.
Mishra, V., Sharma, S., & Smyth, R (2010). Is economic development in the Pacific island countries export-led or import-led? Pacific Economic Bulletin, vol. 25(1), 46-63.
Neumayer, E., & Soysa, I. D. (2005). Trade Openness, Foreign Direct Investment, and Child Labor. World Development, 33(1), 43-63.
Nicolette, C. (2011). Services Trade Liberalisation and the Role of the Services Sector in South African Development. South African Institute of International Affairs Occasional Paper, 90, Retrieved from
Nsiah, C., & Fayissa, B. (2018). Revisiting the Short and Long-Run Impacts of Trade Openness: Evidence from the African Growth Experience. Retrieved from
(2008). Handbook on Constructing Composite Indicators: Methodology and User Guide. OECD Statistics, Working Paper STD/DOC, (2005)3 (Paris OECD), Retrieved from
Pernia, M. E., & Quising, P. F. (2003). Trade Openness and Regional Development in a Developing Country. The Annals of Regional Science, 37(3), 391–406.
Pritchett, L. (1996). Measuring Outward Orientation in LDCs: Can it be done? Journal of Development Economics, 49(2), 307-335.
Rahman, M. M. (2017). Do Population Density, Economic Growth, Energy Use, and Exports Adversely Affect Environmental Quality in Asian Populous Countries? Renewable and Sustainable Energy Reviews, 77(2017), 506–514.
Rifat, B. T. (2012). Development Aid, Openness to Trade and Economic Growth in the least Developed Countries: Bootstrap Panel Granger Causality Analysis. Procedia - Social and Behavioral Sciences, 62(2012), 716-721.
Rodriguez, F., & Dani, R. (2001). Trade Policy and Economic Growth: A Skeptic's Guide to the Cross-National Evidence. NBER Macroeconomics Annual 2000, Retrieved from
Romer, D. (1993). Openness and Inflation: Theory and Evidence. The Quarterly Journal of Economics, 108(4), 869–903.
Rudra, P. P., Mak, A. B., John, H. H., & Neville, N. R. (2017). ASEAN Economic Growth, Trade Openness and Banking-Sector Depth. Economia, 18(2017), 359-379.
Sabina, S., & Eldin, M. (2018). Trade Openness and Economic Growth: Empirical Evidence from Transition Economies (9-23). Retrieved from
Sachs, J. D., & Warner, A. (1995). Economic Reform and the Process of Global. Brookings Papers on Economic Activity, 1, Retrieved from
Salma, S., Mahnaz, M. A., Kauser, A., & Ahmed, F. B. (2013). Impact of Trade Liberalization on Economic Growth in Pakistan. Interdisciplinary Journal of Contemporary Research in Business, V(5), 228-240.
Shahabadi, A., Samari, H., & Nemati, M. (2016). Factors Affecting Environmental Performance Index (EPI) in Selected OPEC Countries. Iranian Economic Review, 21(3), 458-467.
Shahbaz, M., Khraief, N., Uddin, G. S., & Ozturk, I. (2014). Environmental Kuznets Curve in an Open Economy: A bounds Testing and Causality Analysis for Tunisia. Renewable and Sustainable Energy Reviews, 34(2014), 325–336.
Shahbaz, M., Nasreen, S., Ahmed, K., & Hammoudeh, S. (2017). Trade Openness–carbon Emissions Nexus: The Importance of Turning Points of Trade Openness for Country Panels. Energy Economics, 61(2017), 221–232.
Sharifi, M., & Azarbaiejani, K. (2016). Analyzing the Interactive Relationship between Trade Liberalization, Financial Development, Economic Growth and Quality of the Environment in OPEC Member Countries. International Business Management, 10(19), 4522-4529.
Squalli, J., & Wilson, K. (2011). A New Measure of Trade Openness. The World Economy, 34(10), 1745-1770.
Tamazian, A., Chousa, J. P., & Vadlamannati, K. C. (2009). Does Higher Economic and Financial Development Lead to Environmental Degradation: Evidence from BRIC Countries? Energy Policy, 37(2009), 246–253.
Tayebi, S. K., & Younespour, S. (2012). The Effect of Trade Openness on Environmental Quality: Evidence from Iran's Trade Relations with the Selected Countries of the Different Blocks. Iranian Economic Review, 16(32), 20-40.
Temple, J. (2002). Openness, Inflation, and the Phillips Curve: A Puzzle. Journal of Money, Credit, and Banking, 34(2), 450-468.
Terra, C. T. (1998). Openness and Inflation: A New Assessment. The Quarterly Journal of Economics, 113(2), 641–648.
Treisman, D. (2000). The Causes of Corruption: a Cross-National Study. Journal of Public Economics, 76(2000), 399–457.
Ulasan, B. (2014). Openness to International Trade and Economic Growth: A Cross-Country Empirical Investigation. Central Bank of the Republic of Turkey Working Paper, 14/07, Retrieved from
Vamvakidis A. (2002). How Robust Is the Growth-Openness Connection? Historical Evidence. Journal of Economic Growth, 7(2002), 57-80.
Warner, A. (2003). Once More into the Breach: Economic Growth and Integration. Center for Global Development Working Paper, 34, Retrieved from
Yanikkaya, H. (2003). Trade Openness and Economic Growth: A Cross-Country Empirical Investigation. Journal of Development Economics, 72(2003), 57-89.
Yaya, K. (2017). The Impact of Trade Openness on Economic Growth: The Case of Cote d’Ivoire Cogent Economics & Finance, 5(1), 1-14.
Zeng, B., Wu, T., & Guo, X. (2019). Interprovincial Trade, Economic Development, and the Impact on Air Quality in China. Resources, Conservation & Recycling, 142(2019), 204–214.
Zhang, Y., & Zhang, S. (2018). The Impacts of GDP, Trade Structure, Exchange Rate and FDI inflows on China's Carbon Emissions Energy Policy, 120(2018), 347–353.