How FTAs Affect Income Levels of Member Countries

Sohn, Chan Hyun; Lee, Minsoo

doi:10.1111/j.1467-9701.2006.00866.x

Cited by 12 publications

(6 citation statements)

References 27 publications

(61 reference statements)

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“…The mixed outcomes of a series of studies conducted on the European Union (EU), European Free Trade Association (EFTA), North American Free Trade Agreement, and Mercado Comun del Sur (MERCOSUR) found that regional integration “can raise the level and growth of GDP per capita”(Baldwin & Seghezza, 1998; Brada & Mendez, 1988; Henrekson, Torstensson, & Torstensson, 1997; Sohn & Lee, 2006). Kamau (2010), who used GMM for COMESA, EAC, and SADC finds that regional integration had a significant and positive long‐term effect on economic growth, too.…”

Section: Literature Reviewmentioning

confidence: 99%

The effect of integration processes of the Common Market for Eastern and Southern Africa on the economic growth of the member states

et al. 2021

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This study aims to identify the significant effects of the Common Market for Eastern and Southern Africa (COMESA) integration processes on the economic growth of the member states over the period 2004–2016. By applying the system generalized method of moments (GMM) technique, the results show that the gross domestic product (GDP) per capita, with a 1‐year lag, has a robust effect on economic growth. Both per capita domestic value‐added (PCDVA) and institutional quality (IQ) exhibit a positive impact on economic growth in the long‐run performance compared to the short‐run performance. Human capital (HC) suggests statistical significance and adverse impact on economic growth in the short and long runs. However, our key variable of interest, namely the regional integration dummy variable (free trade area, FTA), has no robust effect on economic growth and exhibits insignificant effects across all interaction models and shows “inverted‐U interaction relationships” with trade openness, intra‐community export, and PCDVA. Other regional economic communities shows a statistically significant negative effect on the GDP per capita in both the short and long runs as well as in its interactions with FTA. The study suggests, among others, that there is a need for COMESA to address the issue of overlapping membership and to promote appropriate PCDVA, IQ, financial development, and HC policies and strategies to boost the economic growth of the member states.

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Section: Literature Reviewmentioning

confidence: 99%

The effect of integration processes of the Common Market for Eastern and Southern Africa on the economic growth of the member states

et al. 2021

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“…Secondly, trade agreements in a number of forms, such as free trade agreements or custom unions that benefit every nation in the course of increasing the quantity of goods traded in the area. Thirdly, regional economic integration facilitates the spread of technology by exchanging ideas, knowledge, and products that could direct domestic firms to adopt technologies that are revolutionary on an international level that increase the quality of a product and reduce the cost of production domestically (Sohn & Lee, 2006).…”

Section: Figure 1: Central Asian Countries' Annual Gdp Per Capita Gro...mentioning

confidence: 99%

Exploring Intra-Group Income Convergence for the Central Asian Countries

2022

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The main objective of this study is to explore income convergence for the Central Asian countries whereas income convergence refers to the state when all nations in a region converge to the identical level of steady state in terms of per capita. This study tested the income convergence through beta convergence and sigma convergence over period from 2003 to 2019. The beta convergence indicates that the poor economies grow more rapidly than the rich nations and catch up with them in terms of per capita income, whereas sigma convergence means that the gaps between the per capita incomes of the nations in the region decrease over the passage of time. The beta convergence is determined through panel unit root tests, whereas sigma convergence is determined through the coefficient of variation. This study finds beta convergence as well as sigma convergence henceforth; income convergence is confirmed in Central Asian countries. It can be concluded that economic integration is in favor of Central Asia, so it is recommended that these nations must ensure economic cooperation with each other through easing trade restrictions and lessening import taxes on imports. Moreover, it will also be helpful to ensure the free mobility of the labor force among Central Asian countries, as it will further help them to ensure economic integration and helps in reducing the income inequality in the region.

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“…Since political and openness factors can be treated as important determinants of convergence Warner, 1995, 1997;Taylor, 1995), we include the political indicator variables, namely democracy (and democracy squared to observe whether there exists any nonlinear relationship (Barro, 1997)), the initial stock of human capital, and the openness to trade variable in the unconditional convergence test in the later regressions in Table I joining a RTA can be treated as a qualifying criterion to become a member of the convergence club (Sohn and Lee, 2006). The results replicate previous findings.…”

Section: Empirical Evidence On B-convergencementioning

confidence: 99%

Does the formation of RTA support the neoclassical growth theory and convergence hypothesis?

Hossain

Joarder²

2014

Journal of Economic Studies

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Purpose – The authors considered three regional trading agreements (RTAs): European Union (EU-25), ASEAN Free Trade Area (AFTA), and South Asian Free Trade Area (SAFTA) to test the hypothesis that poor members within a RTA catch rich members and thereby follow the path of income convergence. Of particular interest is to test whether partial openness (i.e. formation of RTAs) or openness or political conditions are conducive to economic growth among the member countries of RTAs. The paper aims to discuss these issues. Design/methodology/approach – The authors used pooled datasets from three different RTAs, namely the EU-25, the AFTA, and the SAFTA. Taking five years average for all variables, starting from 1961 to 1965 and extending to 2001-2005, the authors tested the hypothesis that the growth rate of per capita GDP is negatively related to the initial level of per capita GDP. Constructing a dynamic behavioral equation and forming the reduced form equation, the authors calculated the s-convergence, and both conditional and unconditional convergence. Findings – The authors found that both the EU-25 and the AFTA exhibit s-convergence, and both conditional and unconditional convergence, while the reverse evidence was observed in the case of the SAFTA. However, the speed of convergence of the AFTA was found to be much higher than that of the EU-25. Originality/value – Formation of RTA by countries should be considered as an essential condition to achieve sustained economic growth. In addition, political rights, trade openness, and more importantly benevolence of the member countries within the RTA must be shown to sustain economic growth and convergence; otherwise with the passage of time, divergence among the RTA members will be evident.

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How FTAs Affect Income Levels of Member Countries

Cited by 12 publications

References 27 publications

The effect of integration processes of the Common Market for Eastern and Southern Africa on the economic growth of the member states

The effect of integration processes of the Common Market for Eastern and Southern Africa on the economic growth of the member states

Exploring Intra-Group Income Convergence for the Central Asian Countries

Does the formation of RTA support the neoclassical growth theory and convergence hypothesis?

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