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Addressing Global Growth Asymmetries through Regional Trade Integration : Some Explorations

  • Ram Upendra Das

    (RIS)

  • Ramaa Sambamurty

Globalization process has entailed trade openness, greater emphasis on foreign direct investment, stabilization policies, redefining the role of the state, among others. Given that another major global trend observed is one of regional trade integration, the paper explores whether due to this trend there has been any concrete relationship with the growth convergence/divergence outcomes. Tests of Beta-convergence under different model specifications suggest that over time developed and developing countries have not converged in terms of their real per capita GDP though they have converged within their own groups of developed and developing countries. Thus, it is concluded that regional trade integration leads to growth convergence regionally and both openness to global trade and regional trade openness are important. However, the results of the paper need to be interpreted with caution due to the presence of non-stationarity, though the problem is not uniform across variables, tests and regional groupings. A policy inference that can be drawn is that at the global level economic cooperation for economic growth convergence needs to be flagged and appropriate institutional mechanisms created to intensify the processes of trade and FDI integration. Broadly, the results are in consonance with the predictions of the New Growth Theories.

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File URL: http://www.eaber.org/node/22095
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Paper provided by East Asian Bureau of Economic Research in its series Trade Working Papers with number 22095.

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Date of creation: Jan 2006
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Handle: RePEc:eab:tradew:22095
Contact details of provider: Postal: JG Crawford Building #13, Asia Pacific School of Economics and Government, Australian National University, ACT 0200
Web page: http://www.eaber.org

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  1. Sala-i-Martin, Xavier, 1994. "Cross-sectional regressions and the empirics of economic growth," European Economic Review, Elsevier, vol. 38(3-4), pages 739-747, April.
  2. Philippe Martin, 1998. "Can Regional Policies Affect Growth and Geography in Europe?," The World Economy, Wiley Blackwell, vol. 21(6), pages 757-774, 08.
  3. Manuel Agosin & Roberto Machado, 2005. "Foreign Investment in Developing Countries: Does it Crowd in Domestic Investment?," Oxford Development Studies, Taylor & Francis Journals, vol. 33(2), pages 149-162.
  4. Cappelen, A. & Castellacci, F. & Fagerberg, J. & Verspagen, B., 2002. "The Impact of Regional Support on Growth and Convergence in the European Union," Working Papers 02.14, Eindhoven Center for Innovation Studies.
  5. Scott, Allen J., 1999. "Regions and the World Economy: The Coming Shape of Global Production, Competition, and Political Order," OUP Catalogue, Oxford University Press, number 9780198296584, March.
  6. Jan Fagerberg & Bart Verspagen, 1996. "Heading for Divergence? Regional Growth in Europe Reconsidered," Journal of Common Market Studies, Wiley Blackwell, vol. 34(3), pages 431-448, 09.
  7. Kumar, Nagesh, 1991. "Mode of rivalry and comparative behaviour of multinational and local enterprises : The case of Indian manufacturing," Journal of Development Economics, Elsevier, vol. 35(2), pages 381-392, April.
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