IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this article

Trade, FDI, and productivity convergence: A dynamic panel data approach in 25 countries

Listed author(s):
  • Lee, Jaehwa
Registered author(s):

    The investigation, described in the paper, included developing and implementing a dynamic panel framework to study and compare the role of trade and foreign direct investment (FDI) in long-run productivity convergence. Specifically, it employed the technique of a recently developed panel unit-root approach to examine and compare time-series behaviors of manufacturing productivity and services productivity of 25 countries from 1975 to 2004. Results indicated that long-run productivity convergence in manufacturing was trade-related as well as FDI-related. The results have also shown that grouping countries according to their trade partners tends to produce more significant evidence for productivity convergence than their FDI partners do. Furthermore, especially services sector shows no or little convergence, while the manufacturing sector shows strong evidence in favor of convergence. The findings suggest that trade and FDI matter for convergence particularly in the manufacturing productivity movement across countries but more specifically that trade proves more important in explaining long-run manufacturing productivity convergence.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL: http://www.sciencedirect.com/science/article/pii/S0922-1425(08)00038-8
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

    Article provided by Elsevier in its journal Japan and the World Economy.

    Volume (Year): 21 (2009)
    Issue (Month): 3 (August)
    Pages: 226-238

    as
    in new window

    Handle: RePEc:eee:japwor:v:21:y:2009:i:3:p:226-238
    Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505557

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

    as
    in new window

    1. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth Through Creative Destruction," Scholarly Articles 12490578, Harvard University Department of Economics.
    2. Edwards, Sebastian, 1993. "Openness, Trade Liberalization, and Growth in Developing Countries," Journal of Economic Literature, American Economic Association, vol. 31(3), pages 1358-1393, September.
    3. Campbell, J.Y. & Perron, P., 1991. "Pitfalls and Opportunities: What Macroeconomics should know about unit roots," Papers 360, Princeton, Department of Economics - Econometric Research Program.
    4. Fosfuri, Andrea & Motta, Massimo & Rønde, Thomas, 1999. "Foreign Direct Investment and Spillovers through Workers' Mobility," CEPR Discussion Papers 2194, C.E.P.R. Discussion Papers.
    5. Luis A. Rivera-Batiz & Paul M. Romer, 1990. "Economic Integration and Endogenous Growth," NBER Working Papers 3528, National Bureau of Economic Research, Inc.
    6. Sala-i-martin, X. & Barro, R.J., 1995. "technological Diffusion, Convergence and Growth," Papers 735, Yale - Economic Growth Center.
    7. Matthew B. Canzoneri & Robert E. Cumby & Behzad Diba, 1996. "Relative Labor Productivity and the Real Exchange Rate in the Long Run: Evidence for a Panel of OECD Countries," NBER Working Papers 5676, National Bureau of Economic Research, Inc.
    8. Baumol, William J & Wolff, Edward N, 1988. "Productivity Growth, Convergence, and Welfare: Reply," American Economic Review, American Economic Association, vol. 78(5), pages 1155-1159, December.
    9. Jonathan Eaton & Samuel Kortum, 2004. "Trade in Capital Goods," Levine's Working Paper Archive 228400000000000019, David K. Levine.
    10. Pasaran, M.H. & Im, K.S. & Shin, Y., 1995. "Testing for Unit Roots in Heterogeneous Panels," Cambridge Working Papers in Economics 9526, Faculty of Economics, University of Cambridge.
    11. Garcia Pascual, Antonio & Westermann, Frank, 2002. "Productivity Convergence in European Manufacturing," Review of International Economics, Wiley Blackwell, vol. 10(2), pages 313-323, May.
    12. Danny Quah, 1993. "Exploiting Cross Section Variation for Unit Root Inference in Dynamic Data," FMG Discussion Papers dp171, Financial Markets Group.
    13. Yin-wong Cheung & Antonio Garcia-Pascual, 2004. "Testing for Output Convergence: A Re-examination," Working Papers 052004, Hong Kong Institute for Monetary Research.
    14. Xu, Bin, 2000. "Multinational enterprises, technology diffusion, and host country productivity growth," Journal of Development Economics, Elsevier, vol. 62(2), pages 477-493, August.
    15. Ben-David, Dan, 1994. "Convergence Clubs and Diverging Economies," CEPR Discussion Papers 922, C.E.P.R. Discussion Papers.
    16. Bernard, Andrew B & Durlauf, Steven N, 1995. "Convergence in International Output," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 10(2), pages 97-108, April-Jun.
    17. Evans, P, 1996. "Using Panel Data to Evaluate Growth Theories," ISER Discussion Paper 0397, Institute of Social and Economic Research, Osaka University.
    18. Ben-David, D., 1995. "Trade and Convergence Among Countries," Papers 35-95, Tel Aviv.
    19. Eduardo Borensztein & Jose De Gregorio & Jong-Wha Lee, 1995. "How Does Foreign Direct Investment Affect Economic Growth?," NBER Working Papers 5057, National Bureau of Economic Research, Inc.
    20. Levin, Andrew & Lin, Chien-Fu & James Chu, Chia-Shang, 2002. "Unit root tests in panel data: asymptotic and finite-sample properties," Journal of Econometrics, Elsevier, vol. 108(1), pages 1-24, May.
    21. Quah, Danny, 1993. "Galton's Fallacy and Tests of the Convergence Hypothesis," CEPR Discussion Papers 820, C.E.P.R. Discussion Papers.
    22. Bernard, Andrew B. & Durlauf, Steven N., 1996. "Interpreting tests of the convergence hypothesis," Journal of Econometrics, Elsevier, vol. 71(1-2), pages 161-173.
    23. Jonathan Eaton & Samuel Kortum, 2002. "Technology, Geography, and Trade," Econometrica, Econometric Society, vol. 70(5), pages 1741-1779, September.
    24. Robert J. Barro, 2012. "Inflation and Economic Growth," CEMA Working Papers 568, China Economics and Management Academy, Central University of Finance and Economics.
    25. Ben-David, Dan & Loewy, Michael B, 1998. "Free Trade, Growth, and Convergence," Journal of Economic Growth, Springer, vol. 3(2), pages 143-170, June.
    26. Robert M. Solow, 1956. "A Contribution to the Theory of Economic Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 70(1), pages 65-94.
    27. Bernard, Andrew B & Jones, Charles I, 1996. "Comparing Apples to Oranges: Productivity Convergence and Measurement across Industries and Countries," American Economic Review, American Economic Association, vol. 86(5), pages 1216-1238, December.
    28. Paul Evans, 1997. "How Fast Do Economies Converge?," The Review of Economics and Statistics, MIT Press, vol. 79(2), pages 219-225, May.
    29. Banerjee, Anindya, 1999. " Panel Data Unit Roots and Cointegration: An Overview," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(0), pages 607-629, Special I.
    30. Robert Z. Lawrence & David E. Weinstein, 1999. "Trade and Growth: Import-Led or Export-Led? Evidence From Japan and Korea," NBER Working Papers 7264, National Bureau of Economic Research, Inc.
    31. Dan Ben-David, 1993. "Equalizing Exchange: Trade Liberalization and Income Convergence," The Quarterly Journal of Economics, Oxford University Press, vol. 108(3), pages 653-679.
    32. David H. Romer & Jeffrey A. Frankel, 1999. "Does Trade Cause Growth?," American Economic Review, American Economic Association, vol. 89(3), pages 379-399, June.
    33. Baumol, William J, 1986. "Productivity Growth, Convergence, and Welfare: What the Long-run Data Show," American Economic Review, American Economic Association, vol. 76(5), pages 1072-1085, December.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:eee:japwor:v:21:y:2009:i:3:p:226-238. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.