Measuring Openness

It is well-known that exporting firms grow fast, are large and productive. No such correlation exists at sector (or even country) level, which could happen either because of aggregation or because openness measures are often ad-hoc in aggregate data. We introduce a measure capturing the response of output to foreign shocks in theory: It computes the value of domestically produced goods sold to final consumers abroad, which is easy to calculate from widely available input-output tables. Empirically our measure implies that open sectors are productive, fast growing, and synchronized. No other existing openness measure has these implications at sector level.