IMPACT OF TRADE OPENNESS ON INCOME PER CAPITA CONVERGENCE SPEED: EVIDENCE FROM D8 GROUP

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RASEKHI SAEED; RANJBAR OMID

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Journal: NAMEH-YE-MOFID Year:2009 | Volume:15 | Issue:1 (72 ECONOMICS) Page(s): 109-134

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Title

IMPACT OF TRADE OPENNESS ON INCOME PER CAPITA CONVERGENCE SPEED: EVIDENCE FROM D8 GROUP

Author(s)

RASEKHI SAEED | RANJBAR OMID | Issue Writer Certificate

Keywords

TRADE OPENNESSQ3

MICRO AND MACRO CONVERGENCEQ3

NEOCLASSICAL GROWTH MODELQ3

CONVERGENCE-GROWTH MODELQ3

FACTOR PRICE EQUALIZATIONQ3

D8Q3

PANEL MODELQ3

Abstract

One of the main questions faced by economic theories is that whether it is possible to decrease income gap between rich and poor countries. This question relates to the oldest and most noisy subjects in economics, which is income convergence hypothesis. This is predicted by economic growth models and FACTOR PRICE EQUALIZATION (FPE) proposition. In the context of its standard assumptions specially decreasing return to capital, NEOCLASSICAL GROWTH MODEL predicts that less developed countries grow faster than developed ones and are able to decrease the gap between developed countries and themselves. Also, based on FPE proposition, free trade equalizes factor price and thus per capita income. In addition, in the framework of endogenous growth model, trade may result in growth acceleration through increasing the rate of technology transfer and diffusion and innovation.Few studies have been done with regard to the role of international trade in income convergence. Based on some of these studies, lower-income economies benefit more from international trade than higher-income economies, which conclude that international trade causes income convergence. Based on some other studies, international trade increases income gap between rich and poor countries. In sum, there is no strong result in line with theoretical and empirical effect of TRADE OPENNESS on income convergence.Present paper examines TRADE OPENNESS impact on the speed of convergence for D8 members by using powerful panel data technique during time 1975-2004. Results indicate that TRADE OPENNESS has significant and positive effect on speed of convergence among D8 members. Based on the results of this paper, it seems that D8 members decrease income gap between themselves by developing mutual trade.Furthermore, based on the results obtained, physical and human capitals have positive and significant effect on economic growth of considered countries.

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APA: Copy

RASEKHI, SAEED, & RANJBAR, OMID. (2009). IMPACT OF TRADE OPENNESS ON INCOME PER CAPITA CONVERGENCE SPEED: EVIDENCE FROM D8 GROUP. NAMEH-YE-MOFID, 15(1 (72 ECONOMICS)), 109-134. SID. https://sid.ir/paper/3601/en

Vancouver: Copy

RASEKHI SAEED, RANJBAR OMID. IMPACT OF TRADE OPENNESS ON INCOME PER CAPITA CONVERGENCE SPEED: EVIDENCE FROM D8 GROUP. NAMEH-YE-MOFID[Internet]. 2009;15(1 (72 ECONOMICS)):109-134. Available from: https://sid.ir/paper/3601/en

IEEE: Copy

SAEED RASEKHI, and OMID RANJBAR, “IMPACT OF TRADE OPENNESS ON INCOME PER CAPITA CONVERGENCE SPEED: EVIDENCE FROM D8 GROUP,” NAMEH-YE-MOFID, vol. 15, no. 1 (72 ECONOMICS), pp. 109–134, 2009, [Online]. Available: https://sid.ir/paper/3601/en

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