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The Role Of International Trade In Convergence Process

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  • Davor Mikulic
  • Ivan Kovac
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    Abstract

    Over the past decades, the issue of convergence in the European Union has been the subject of a wide range of empirical research. The model most widely used for testing convergence hypotheses is beta-convergence analysis. Beta-convergence is defined as a negative relation between the initial income level and the income growth rate, meaning the less developed regions are expected to record higher growth rates. According to the absolute convergence hypothesis, all regions converge towards the same steady state equilibrium. On the other hand, conditional convergence model controls for other differences in cross-sectional units that could produce different steady-state. Other factors usually included in econometric modelling of convergence are demographic variables, labour market conditions, industrial structure, institutional factors and overall government policy. In this paper, the role of international trade in convergence process has also been investigated. The main hypothesis tested in this work is that openness and international trade significantly support process of convergence in EU. On the other hand process of convergence is not evident for Croatian's regions and role of international trade is less significant in explaining regional growth patterns. Besides descriptive statistics econometric modelling is used for confirmation of the hypothesis.

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    Bibliographic Info

    Article provided by Economic Laboratory for Transition Research (ELIT) in its journal Montenegrin Journal of Economics.

    Volume (Year): 8 (2012)
    Issue (Month): 4 ()
    Pages: 7-26

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    Handle: RePEc:mje:mjejnl:v:8:y:2012:i:4:p:7-26

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    Web page: http://www.mnje.com

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    1. Jan De Loecker, 2004. "Do Exports Generate Higher Productivity? Evidence from Slovenia," LICOS Discussion Papers 15104, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
    2. 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.
    3. Sala-i-Martin, Xavier X., 1996. "Regional cohesion: Evidence and theories of regional growth and convergence," European Economic Review, Elsevier, vol. 40(6), pages 1325-1352, June.
    4. Paas, Tiiu & Schlitte, Friso, 2007. "Regional income inequality and convergence processes in the EU-25," HWWI Research Papers 1-11, Hamburg Institute of International Economics (HWWI).
    5. M. Taner Yigit & Ali M. Kutan, 2004. "European Integration, Productivity Growth and Real Convergence," Departmental Working Papers 0402, Bilkent University, Department of Economics.
    6. Ben-David, Dan, 1995. "Trade and Convergence Among Countries," CEPR Discussion Papers 1126, C.E.P.R. Discussion Papers.
    7. Ben-David, Dan & Loewy, Michael B, 1998. " Free Trade, Growth, and Convergence," Journal of Economic Growth, Springer, vol. 3(2), pages 143-70, June.
    8. Awokuse, Titus O., 2007. "Causality between exports, imports, and economic growth: Evidence from transition economies," Economics Letters, Elsevier, vol. 94(3), pages 389-395, March.
    9. Giuseppe Arbia & Roberto Basile & Gianfranco Piras, 2005. "Using Spatial Panel Data in Modelling Regional Growth and Convergence," ISAE Working Papers 55, ISTAT - Italian National Institute of Statistics - (Rome, ITALY).
    10. Catherine Baumont & Cem Ertur & Julie Le Gallo, 2002. "The European Regional Convergence Process, 1980-1995: Do Spatial Regimes and Spatial Dependence Matter?," Econometrics 0207002, EconWPA.
    11. Giuseppe Arbia & Gianfranco Piras, 2004. "Convergence in per-capita GDP across European regions using panel data models extended to spatial autocorrelation effects," ERSA conference papers ersa04p524, European Regional Science Association.
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