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China and India: Openness, Trade and Effects on Economic Growth

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  • Enrico Marelli
  • Marcello Signorelli

Abstract

The paper has two objectives. Firstly, we wish to evaluate whether a greater economic integration has effects, and of what type, on migration flows from Central and Eastern Europe (New Member States of the EU, NMS) towards the fifteen countries of the European Union (EU-15). Secondly, we wish to understand what effect the migration flows from the NMS have on the labour market of the receiving countries in the EU-15. The most suitable theoretical context that seems to summarise European labour market characteristics is that of the insider/outsider model by Layard, Nickell and Jackman (Layard et al., 1991). We have modified the above mentioned model by introducing two innovations. Firstly, we constructed three measures that act as a proxy for economic integration: the Intra Regional Trade Index (IRTI), Global Trade Index (GTI) and Financial Market Integration (FMI). Then we placed the three indicators into the insider/outsider model to arrive at a modified version of Layard, Nickell and Jackman (Layard et al., 1991). The second innovative contribution was the introduction of an equation modelling migration flows. The creation of this equation is inspired by the neo-classical approach to migration theory (Harris-Todaro, 1970). The theoretical model, based on rational expectations, has been solved to find the equilibrium solution and the impact multipliers. We then carried out an empirical analysis, which involved estimating a Structural Vector Autoregression Model (SVAR). The aim of this estimation was to evaluate, on the one hand, the effect that greater European integration (a positive shock to the integration indicators) has on migration flows, and, on the other, to measure the type of effect that migration flows could have on the labour market of the EU-15 countries, considered as a single entity. The results of our empirical evidence show that economic integration does generate significant effects on migration flows from the enlargement countries towards the EU-15 countries. It also emerges that migration flows do generate an effect on the European labour market.

Suggested Citation

  • Enrico Marelli & Marcello Signorelli, 2011. "China and India: Openness, Trade and Effects on Economic Growth," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 8(1), pages 129-154, June.
    • Handle: RePEc:liu:liucej:v:8:y:2011:i:1:p:129-154
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    More about this item

    Keywords

    China and India; economic growth; trade opening; trade specialisation; trade and growth;
    All these keywords.

    JEL classification:

    • P52 - Political Economy and Comparative Economic Systems - - Comparative Economic Systems - - - Comparative Studies of Particular Economies
    • P33 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - International Trade, Finance, Investment, Relations, and Aid
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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