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

  • Ahmed Nawaz Hakro

    ()

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

  • Bashir Ahmad Fida

    ()

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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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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  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. 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.
  3. Jeffrey Frankel & Andrew Rose, 2002. "An Estimate Of The Effect Of Common Currencies On Trade And Income," The Quarterly Journal of Economics, MIT Press, vol. 117(2), pages 437-466, May.
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  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. Dan Ben-David & Michael B. Loewy, 1997. "Free Trade, Growth, and Convergence," NBER Working Papers 6095, National Bureau of Economic Research, Inc.
  9. 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.
  10. Dan Ben-David & Ayal Kimhi, 2000. "Trade and the Rate of Income Convergence," NBER Working Papers 7642, National Bureau of Economic Research, Inc.
  11. 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.
  12. 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.
  13. T. W. Swan, 1956. "ECONOMIC GROWTH and CAPITAL ACCUMULATION," The Economic Record, The Economic Society of Australia, vol. 32(2), pages 334-361, November.
  14. 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.
  15. 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.
  16. Alwyn Young, 1991. "Learning by Doing and the Dynamic Effects of International Trade," NBER Working Papers 3577, National Bureau of Economic Research, Inc.
  17. Swan, Trevor W, 2002. "Economic Growth," The Economic Record, The Economic Society of Australia, vol. 78(243), pages 375-80, December.
  18. Ben-David, Dan, 1996. "Trade and convergence among countries," Journal of International Economics, Elsevier, vol. 40(3-4), pages 279-298, May.
  19. David H. Romer & Jeffrey A. Frankel, 1999. "Does Trade Cause Growth?," American Economic Review, American Economic Association, vol. 89(3), pages 379-399, June.
  20. Ben-David, Dan, 1993. "Equalizing Exchange: Trade Liberalization and Income Convergence," The Quarterly Journal of Economics, MIT Press, vol. 108(3), pages 653-79, August.
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