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Trade Openness And Income: A Tale Of Two Regions

Author

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  • Mariam Camarero

    (Departamento de Economía. Universidad Jaume I. Campus de Riu Sec. E-12071 Castellón, Spain.)

  • Inmaculada Martínez-Zarzoso

    (Departamento de Economía. Universidad Jaume I. Campus de Riu Sec. E-12071 Castellón, Spain. & University of Goettingen , Ibero-America Institute for Economic Research, Platz der Goettinger Sieben 3, D-37073 Goettingen Germany .)

  • Felicitas Nowak-Lehmann D.

    (University of Goettingen , Ibero-America Institute for Economic Research, Platz der Goettinger Sieben 3, D-37073 Goettingen Germany .)

  • Cecilio Tamarit

    (Departamento de Economía Aplicada II. Universidad de Valencia. Avda. dels Tarongers s/n. E-46022 Valencia, Spain.)

Abstract

In this article we present evidence of the long-run effect of trade openness on income per worker for two regions that have followed different liberalization strategies, namely Asia and Latin America. A model that re-examines these questions is estimated for two panels of Asian and Latin American countries over the 1980-2008 period using a novel empirical approach that accounts for endogeneity as well as for the time series properties of the variables involved. From an econometric point of view, we apply recent panel cointegration techniques based on factor models that account for two additional elements usually neglected in previous empirical literature: cross-dependence and structural breaks. The results point to a positive impact of trade openness in both Asia and Latin America although the size is smaller in the second region. We associate this finding with the degree to which trade was managed in both regions of the developing world.

Suggested Citation

  • Mariam Camarero & Inmaculada Martínez-Zarzoso & Felicitas Nowak-Lehmann D. & Cecilio Tamarit, 2014. "Trade Openness And Income: A Tale Of Two Regions," Working Papers 1409, Department of Applied Economics II, Universidad de Valencia.
  • Handle: RePEc:eec:wpaper:1409
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    References listed on IDEAS

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    Keywords

    GDP per worker; trade openness; panel cointegration; structural breaks; crosssection dependence; Asia; Latin America.;

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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