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Trade and Income Convergence in Selected South Asian Countries and Their Trading Partners

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Author Info

  • Ahmed Nawaz Hakro

    ()
    (College of Economics, Management and Information Systems, University of Nizwa, Oman.)

  • Bashir Ahmad Fida

    ()

Abstract

This paper analyzes trade among and the convergence of per capita income for India, Pakistan, Bangladesh, and Sri Lanka. The extent of trade and its relationship with the magnitude of income convergence is studied among these countries and their trading partners. We use intra-trade convergence and the difference-in-differences approach for the estimations. The results demonstrate that an increase in trade between the groups decreases the per capita income differential. Our results suggest that trade liberalization policies could be effective in achieving convergence. More importantly, we find that the per capita income of our source countries converged more rapidly under post-liberalization regimes than pre-liberalization regimes.

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Bibliographic Info

Article provided by Department of Economics, The Lahore School of Economics in its journal Lahore Journal of Economics.

Volume (Year): 14 (2009)
Issue (Month): 2 (Jul-Dec)
Pages: 49-70

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Handle: RePEc:lje:journl:v:14:y:2009:i:2:p:49-70

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Keywords: Intra-trade; income convergence; per capita income; South Asia.;

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References

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  1. Matthew J. Slaughter, 1997. "Per Capita Income Convergence and the Role of International Trade," NBER Working Papers 5897, National Bureau of Economic Research, Inc.
  2. Frankel, Jeffrey & Rose, Andrew K., 2001. "An Estimate of the Effect of Common Currencies on Trade and Income," Working Paper Series rwp01-013, Harvard University, John F. Kennedy School of Government.
  3. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-37, October.
  4. Jeffrey D. Sachs & Andrew Warner, 1995. "Economic Reform and the Process of Global Integration," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(1, 25th A), pages 1-118.
  5. Parikh, Ashok & Shibata, Miyuki, 2004. "Does trade liberalization accelerate convergence in per capita incomes in developing countries?," Journal of Asian Economics, Elsevier, vol. 15(1), pages 33-48, February.
  6. Dan Ben-David & Michael B. Loewy, 1997. "Free Trade, Growth, and Convergence," NBER Working Papers 6095, National Bureau of Economic Research, Inc.
  7. Irwin, Douglas A. & Tervio, Marko, 2002. "Does trade raise income?: Evidence from the twentieth century," Journal of International Economics, Elsevier, vol. 58(1), pages 1-18, October.
  8. Young, Alwyn, 1991. "Learning by Doing and the Dynamic Effects of International Trade," The Quarterly Journal of Economics, MIT Press, vol. 106(2), pages 369-405, May.
  9. T. W. Swan, 1956. "ECONOMIC GROWTH and CAPITAL ACCUMULATION," The Economic Record, The Economic Society of Australia, vol. 32(2), pages 334-361, November.
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  12. Dan Ben-David & Ayal Kimhi, 2000. "Trade and the Rate of Income Convergence," NBER Working Papers 7642, National Bureau of Economic Research, Inc.
  13. Ben-David, D., 1995. "Trade and Convergence Among Countries," Papers 35-95, Tel Aviv.
  14. Robert J. Barro & Xavier Sala-i-Martin, 1991. "Convergence across States and Regions," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 22(1), pages 107-182.
  15. Swan, Trevor W, 2002. "Economic Growth," The Economic Record, The Economic Society of Australia, vol. 78(243), pages 375-80, December.
  16. Slaughter, Matthew J, 1997. "Per Capita Income Convergence and the Role of International Trade," American Economic Review, American Economic Association, vol. 87(2), pages 194-99, May.
  17. N. Gregory Mankiw & David Romer & David N. Weil, 1990. "A Contribution to the Empirics of Economic Growth," NBER Working Papers 3541, National Bureau of Economic Research, Inc.
  18. Kravis, Irving B, 1970. "Trade as a Handmaiden of Growth: Similarities between the Nineteenth and Twentieth Centuries," Economic Journal, Royal Economic Society, vol. 80(323), pages 850-72, December.
  19. Alwyn Young, 1991. "Learning by Doing and the Dynamic Effects of International Trade," NBER Working Papers 3577, National Bureau of Economic Research, Inc.
  20. Slaughter, Matthew J., 2001. "Trade liberalization and per capita income convergence: a difference-in-differences analysis," Journal of International Economics, Elsevier, vol. 55(1), pages 203-228, October.
  21. Barro, Robert J & Sala-i-Martin, Xavier, 1992. "Convergence," Journal of Political Economy, University of Chicago Press, vol. 100(2), pages 223-51, April.
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