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Integration and Growth in East Asia

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Author Info
Sanghoon Ahn (Korea Development Institute)
nd Jong-Wha Lee (Corresponding author: Office of Regional Economic Integration, Asian Development Bank, 6 ADB Avenue, Mandaluyong City, 1550 Metro Manila, Philippines. Tel.: 632-632-4900, fax: 632-636- 2183, E-mail: jwlee@adb.org.)

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Abstract

This paper empirically analyzes the experience of East Asiafs economic growth with data both at aggregate-economy and micro-firm levels, focusing on the role of international integration through trade and direct investment. The analysis within a framework of cross-country panel regression shows that trade openness and foreign direct investment (FDI) inflows have a positive effect on gross domestic product (GDP) growth? particularly in the 1970 and 1980s?while FDI outflows appear to have a negative effect on GDP growth. Micro-level evidence based on manufacturing data in the Republic of Korea (Korea) confirms the positive effect of trade and investment integration on plant-level productivity growth. It also suggests the relationship between FDI outflows and productivity growth depends on the characteristics of a recipient economy. We find that FDI to the Peoplefs Republic of China tends to reduce productivity growth of firms in Korea while FDI to the United States or Japan works in favor of productivity growth.

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Publisher Info
Paper provided by Institute for Monetary and Economic Studies, Bank of Japan in its series IMES Discussion Paper Series with number 07-E-14.

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Date of creation: Aug 2007
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Handle: RePEc:ime:imedps:07-e-14

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Related research
Keywords: integration; growth; trade; foreign direct investment; East Asia;

Find related papers by JEL classification:
F15 - International Economics - - Trade - - - Economic Integration
F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
O47 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
O53 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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