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Integration and Growth in East Asia

Author

Listed:
  • Sanghoon Ahn

    (Korea Development Institute)

  • Jong-Wha Lee

    (Asian Development Bank (Corresponding author; e-mail: jwlee@adb.org))

Abstract

This paper empirically analyzes the experience of East Asia f s 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 GDP growth -particularly in the 1970s 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 that the relationship between FDI outflows and productivity growth depends on the characteristics of a recipient economy. We find that FDI to the People fs 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.

Suggested Citation

  • Sanghoon Ahn & Jong-Wha Lee, 2007. "Integration and Growth in East Asia," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 25(S1), pages 131-168, December.
  • Handle: RePEc:ime:imemes:v:25:y:2007:i:s1:p:131-168
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    File URL: http://www.imes.boj.or.jp/research/papers/english/me25-s1-7.pdf
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    References listed on IDEAS

    as
    1. Alfaro, Laura & Chanda, Areendam & Kalemli-Ozcan, Sebnem & Sayek, Selin, 2004. "FDI and economic growth: the role of local financial markets," Journal of International Economics, Elsevier, vol. 64(1), pages 89-112, October.
    2. David H. Romer & Jeffrey A. Frankel, 1999. "Does Trade Cause Growth?," American Economic Review, American Economic Association, vol. 89(3), pages 379-399, June.
    3. David Dollar & Aart Kraay, 2004. "Trade, Growth, and Poverty," Economic Journal, Royal Economic Society, vol. 114(493), pages 22-49, February.
    4. Francisco Rodriguez & Dani Rodrik, 2001. "Trade Policy and Economic Growth: A Skeptic's Guide to the Cross-National Evidence," NBER Chapters,in: NBER Macroeconomics Annual 2000, Volume 15, pages 261-338 National Bureau of Economic Research, Inc.
    5. Sanghoon Ahn & Kyoji Fukao & Hyeog Ug Kwon, 2005. "The Internationalization and Performance of Korean and Japanese Firms: An Empirical Analysis Based on Micro-data," Discussion papers 05008, Research Institute of Economy, Trade and Industry (RIETI).
    6. Sanghoon Ahn & Kyoji Fukao & Keiko Ito, 2008. "Outsourcing in East Asia and its impact on the Japanese and Korean Labour Markets," OECD Trade Policy Papers 65, OECD Publishing.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Integration; Growth; Trade; Foreign direct investment; East Asia;

    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, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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