How FTAs affect income levels of member countries

Chan Hyun Sohn, Hongshik Lee

Research output: Contribution to journalArticle

7 Citations (Scopus)

Abstract

The purpose of this paper is to analyse whether FTAs cause the income levels of member economies to converge or diverge. Although existing studies predict the possibility of convergence among FTA members to a certain degree, they fail to provide definitive evidence. By using the concept of accelerating convergence, this study aims to estimate the pure convergence effects of FTAs, separate from the conventional notion of income convergence, so-called-convergence. The neoclassical model of economic growth has been extended to incorporate varying steady states for an open-economy framework. Applying the system GMM method to a dynamic panel of data consisting of major FTAs -comprising the European Union, NAFTA, Mercosur and AFTA, and encompassing the cases of launching an FTA, expanding membership or deepening FTA integration -we find considerable evidence for the income convergence effect of FTAs.

Original languageEnglish
Pages (from-to)1737-1757
Number of pages21
JournalWorld Economy
Volume29
Issue number12
DOIs
Publication statusPublished - 2006 Dec 1
Externally publishedYes

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ASJC Scopus subject areas

  • Finance
  • Accounting
  • Economics and Econometrics
  • Political Science and International Relations

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