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Income Convergence and trade Openness: Fuzzy Clustering and Time Series Evidence

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Abstract

In the now extensive literature on the convergence of per capita income (output) across countries over time, there is surprisingly little attention paid to the role of international trade in goods and services. Some more recent studies have illustrated that standard trade theories provide no clear prediction as to the impact of trade liberalization on output convergence. These studies have also provided somewhat ambiguous empirical evidence regarding this relationship, under-scoring the need for additional results in this area. This paper uses both standard and new approaches to testing for convergence in order to explore the extent to which the degree of trade openness may affect output convergence among countries. Using annual time-series data for 88 countries from the Penn World Tables, we obtain somewhat mixed results, but on balance they are quite supportive of a positive relationship (though not necessarily causality) between trade openness and income convergence. These results also suggest certain directions that further research might take in order to shed more light on this important issue.

Suggested Citation

  • Chad Stroomer & David E.A. Giles, 2003. "Income Convergence and trade Openness: Fuzzy Clustering and Time Series Evidence," Econometrics Working Papers 0304, Department of Economics, University of Victoria.
  • Handle: RePEc:vic:vicewp:0304
    Note: ISSN 1485-6441
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    Cited by:

    1. David Giles & Chad Stroomer, 2006. "Does Trade Openness Affect the Speed of Output Convergence? Some Empirical Evidence," Empirical Economics, Springer, vol. 31(4), pages 883-903, November.
    2. Morillas, Antonio & Díaz, Bárbara, 2007. "Qualitative Answering Surveys And Soft Computing," Fuzzy Economic Review, International Association for Fuzzy-set Management and Economy (SIGEF), vol. 0(1), pages 3-19, May.
    3. Zarembova, Andrea & Lyocsa, Stefan & Baumöhl, Eduard, 2012. "The Real Convergence of CEE Countries: A Study of Real GDP per capita," EconStor Open Access Articles, ZBW - German National Library of Economics, pages 642-656..

    More about this item

    Keywords

    Openness; international trade; output convergence; economic growth; time-series; fuzzy clustering;

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • F15 - International Economics - - Trade - - - Economic Integration
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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