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Trade Openness And Income: A Tale Of Two Regions

Listed author(s):
  • 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.)

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.

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File URL: ftp://147.156.210.157/RePEc/pdf/eec_1409.pdf
File Function: First version, 2014
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Paper provided by Department of Applied Economics II, Universidad de Valencia in its series Working Papers with number 1409.

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Date of creation: Sep 2014
Handle: RePEc:eec:wpaper:1409
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