Trade Openness and Income: A Tale of Two Regions

23 Pages Posted: 23 Mar 2016

See all articles by Mariam Camarero

Mariam Camarero

Jaume I University - Department of Economics

Inmaculada Martínez-Zarzoso

University of Goettingen (Gottingen) - School of Law, Economics, Social Sciences; Jaume I University - Department of Economics

Felicitas Nowak‐Lehmann

University of Goettingen (Gottingen)

Cecilio R. Tamarit

University of Valencia - Department of Applied Economics

Date Written: March 2016

Abstract

In this paper, we present evidence of the long‐run effect of trade openness on income per worker for two regions that have followed different liberalisation 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 co‐integration 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

Camarero Olivas, María Amparo (Mariam) and Martínez-Zarzoso, Inmaculada and Nowak‐Lehmann, Felicitas and Tamarit Escalona, Cecilio R., Trade Openness and Income: A Tale of Two Regions (March 2016). The World Economy, Vol. 39, Issue 3, pp. 386-408, 2016. Available at SSRN: https://ssrn.com/abstract=2753331 or http://dx.doi.org/10.1111/twec.12306

María Amparo (Mariam) Camarero Olivas (Contact Author)

Jaume I University - Department of Economics ( email )

Campus del Riu Sec.
E-12071 Castellon
Spain

Inmaculada Martínez-Zarzoso

University of Goettingen (Gottingen) - School of Law, Economics, Social Sciences ( email )

Germany

Jaume I University - Department of Economics ( email )

Campus del Riu Sec.
E-12071 Castellon
Spain

Felicitas Nowak‐Lehmann

University of Goettingen (Gottingen)

Platz der Gottinger Sieben 3
Gottingen, D-37073
Germany

Cecilio R. Tamarit Escalona

University of Valencia - Department of Applied Economics ( email )

4F04 Edificio Departamental Oriental
P.O. Box 22.006
Valencia, 33006
Spain
+34-963828349 (Phone)
+34-963828354 (Fax)

HOME PAGE: http://www.uv.ed/~tamac/

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