Life expectancy and trade openness: causality in Latin America

This study examines the relationship between foreign direct investment (FDI) inflow, trade openness, and the influence of FDI on economic growth. The threshold methodology and GMM estimation are employed to analyze panel data from 60 developing countries in the period between 1995 and 2019. This study demonstrates the positive impact of FDI on economic growth in developing countries. However, the study also finds a significant threshold of FDI inflow relative to GDP that changes the impact of inward FDI on GDP growth. Regarding the role of trade openness, a significant threshold is found, which also indicates the absorptive capacity of the host countries. Moving from below to above this threshold, an increase in FDI inflow leads to a lower increase in economic growth. An increase in FDI relative to GDP stimulates growth only when the host country has sufficient absorptive capacity with regard to trade openness above the threshold. We suggest developing countries tighten the coherence of trade liberalization and FDI attraction policies to obtain the benefits of FDI and make changes to attract new investors when they succeed in attracting massive FDI inflows.

A neurology revival in Latin America

The long run trade orientation of an economy is measured in this article by an index which measures the extent to which the real exchange rate is distorted away from its free trade level by the trade regime. The technique for estimating a cross country index of real exchange rate distortion uses the international comparison of prices prepared by Robert Summers and Alan Heston. Resource endowment constitutes the norm and real overvaluation or undervaluation relative to this norm reveals whether incentives are directed to the domestic or international market. The index is constructed based on data for GDP/capita average price level in US dollars 1976-85 and GDP growth rate/capita 1976-85. Other sections are devoted the comparison of the procedure for 117 countries between 1976-85 and an examination of the empirical relationship between outward orientation and economic growth and sensitivity analysis. The results indicate that Latin America generally was overvalued by 33% relative to Asia and Africa was overvalued by 86%. The real exchange rate distortion index supports the view that Asian countries are more outward oriented. Asian economies have lower price levels which reflect relatively modest protection and incentives oriented to external markets. Latin American countries with moderately high price level and African countries with very high price levels reflect strong protection and incentives directed to production for the domestic market. An alternative specification which eliminates the dummy variables for Africa yields similar results with slightly lower magnitude; i.e. overvaluation is 60% instead of 86% for Africa and Latin America is overvalued by 39% instead of 33% over Asia. A table is provided which indicates by country the distortion and variability of the real exchange rate the GDP growth the 1976 GDP/capita and the investment rate. Another finding was that there is a significant negative relationship between distortion of the real exchange rate and growth of GDP/capita after controlling for the effects of real exchange rate variability and investment level with both the original specification and the alternative. The growth rate/capita of Latin American and African countries would increase 1.5-2.1% with a shift to move outward oriented trade policies. This gain as well as devaluation of the real exchange reate trade liberalization and maintenance of a stable real exchange rate would contribute to positive growth rates. In the analysis of the poorest 24 countries the result was that only rate distortion and not variability and investment rate explained the growth rate. The gain for Ghana for example of adopting the trade policies and exchange rate of Bangladesh would be 5% to its growth.

The globalization process has led to considerable increases in the flow of goods, services and financial assets, and thus global production and wealth have risen substantially during the past 40 years. However, discussion has now centered around the rising income inequality and poverty in some parts of the world. In this regard, the Latin American region is one of the leading regions in terms of income inequality. This study investigates the interaction among misery index, corruption and income inequality in Latin American countries during the 2002-2014 period, employing the Westerlund and Edgerton (2007) LM bootstrap cointegration test and the Kónya (2006) bootstrap panel Granger causality test. The findings reveal that increases in both the misery index and corruption played a part in the increases in income inequality. Furthermore, the results of the causality test reveal unidirectional causality from the misery index to income inequality and bidirectional causality between corruption and income inequality.

This study investigates the role of non-renewable and renewable energy consumption in the sustainable development in 16 Latin America and Caribbean Emerging Market and Developing Economies (EMDEs) incorporating capital, government expenditure, institution quality, financial development, and trade openness by a multivariate framework using annual data from 1990 to 2014. We apply second-generation techniques for heterogeneous panel data as the presence of cross-sectional dependence and slope heterogeneity is detected. Accordingly, CADF and CIPS unit root tests show that all variables are integrated at order 1. Westerlund cointegration test acknowledges the long-run relationship among the variables. The long-run estimation is conducted by the Augmented Mean Group (AMG), Mean Group (MG) and Common Correlated Effects Mean Group (CCEMG) estimators. The findings indicate that, in the long run, renewable and non-renewable energy use, along with other factors including government expenditure, gross fixed capital formation, trade openness and financial development, positively affects the economic growth in the selected countries. The empirical results imply that the EMDEs in Latin America and the Caribbean should appropriately implement fiscal policies for macroeconomic stabilization in combination with finance and international trade policies as well as effective energy strategies to attain their sustainable development objectives.

Purpose – The objective of this paper is to explore the impacts of trade openness and the inflows of FDI on brain drain in the case of developing world. This is a new strand as existing literature has focused on the relationship between trade openness, FDI and economic growth. Design/methodology/approach - We utilized panel data of 56 developing countries of origin and 20 OECD host countries for 1985-2010 time period. Panel econometric techniques are utilized to check cointegration among the variables. Fully modified ordinary least squares and dynamic ordinary least squares methods are used to estimate coefficients of the variables. Similarly, pairwise granger causality test is carried out to check the direction of relationship. Findings - Using panel cointegration techniques, the study reveals that both trade openness and FDI matters for brain drain. The results indicated that openness of trade has a positive and FDI has a negative impact on brain drain problem. Further, the empirical results revealed one way causality from FDI to trade openness and from brain drain to trade openness. Policy makers of the developing world are expected to be benefited from the results of the study and hence they would in turn be in a better position to make appropriate policies regarding both FDI and trade openness to overcome the problem of brain drain. Originality/value – The findings of the paper are original as the available literature ignored the role of trade openness and FDI regarding the issue of brain drain.

Purpose The study examined the impact of financial development, foreign direct investment, market size and trade openness on domestic investment for 119 countries divided into four panels that are low-income countries (LIC), lower middle-income countries (LMIC), upper middle-income countries (UMIC) and high-income countries (HIC) between 1995 and 2019. Design/methodology/approach The present study bases its empirical procedure on the bases of the data mix. To this end, based on the presence of cross-sectional dependence, covariate-augmented Dickey–Fuller unit root and Westerlund cointegration second-generation tests were employed to validate the stationarity and cointegration of the variables, respectively. The novel Dynamic Common Correlation Effects estimator was employed to estimate the heterogeneous parameters while the Dumitrescu and Hurlin test was used to test for causality direction of the highlighted variables. Findings The empirical results show that market size and trade openness had a positive and statistically significant effect on domestic investment for all the income groups. Results also show that financial development had a positive and statically significant effect on domestic investment only for LMIC and HIC economies, while a positive and statistically insignificant effect was obtained for LIC, UMIC and the global panel. The causality results revealed a bidirectional relationship between domestic investment and the exogenous variables – financial development, foreign direct investment, market size and trade openness. Research limitations/implications It is therefore, recommended that LIC and LMIC need to consider harmonising the financial system to lower credit limitations and adopt business-friendly policies. HIC and UMIC should seek more outward FDI policies and harmonise their trade policy, to reap more benefits from FDI and international trade. Originality/value On novelty, previous studies have been criticised for the effect on technical innovation of bank financing and institutional quality. This research tackles the deficiency using systematic institutional quality indicators and by taking other variables into account.

Purpose– The purpose of this paper is to investigate the factors influencing the total factor productivity (TFP) gap between the USA and eight Latin American countries for the period of 1970-2000.Design/methodology/approach– The paper provides an explicit application of TFP estimation by employing a growth accounting approach (Solow Residual) in the presence of non-constant returns to scale and a non-parametric approach (DEA – Malmquist Index) while relaxing the scale-related constraint. A macro-based economic model of innovator and follower countries is employed to explore the linkage between technology gaps and innovations, labor productivity, trade openness, foreign direct investment, and adult workforce illiteracy rates. A pooled model and a fixed effects model are used to determine the factors of the technology gap between the innovator and the follower countries.Findings– The results show that the labor productivity gap, adult work force illiteracy rates, patent filing gap, and trade openness are significant determinants of the technology gap between innovator and follower country.Practical implications– Latin American countries would benefit from the technology diffusion from an innovator country; but a minimum threshold of human capital, such as adult workforce illiteracy rates and patent filing has to be met. The authors find government policies on trade openness also have large effects on technology limitations in foreign countries.Originality/value– This paper is of value to researchers, policy makers, and economic development specialists trying to improve the rate of technology adoption and innovation.

PurposeThe purpose of this paper is to analyze the effects of corruption on economic growth, human development and natural resources in Latin American and Nordic countries.Design/methodology/approachUsing the hierarchical prior of Gelman et al. (2003), a Bayesian panel Vector AutoRegression (VAR) model is estimated. In addition, two alternative approaches are considered, namely, a panel error correction VAR model and an asymmetric panel VAR model.FindingsThe results reveal some relevant contrasts: (1) in Latin America there is support for the sand the wheels hypothesis in Bolivia and Chile, support for the grease the wheels hypothesis in Colombia and no significant impact of corruption on growth in Brazil and Peru, while in Nordic countries the response of growth to shocks in corruption is negative in all cases; (2) corruption negatively affects human development in all countries from both regions; (3) corruption tends to spur natural resources sector in Latin American countries, while it is detrimental for natural resources sector in Nordic countries.Research limitations/implicationsThe panel VAR approach uses recursive scheme identification. The authors have analyzed robustness using alternative ordering of the variables. The authors also have followed two alternatives suggested by the Referee: a panel error correction VAR model and a panel asymmetric VAR model. However, another more sophisticated identification scheme could be used. Also other variables could be introduced in the VAR model.Practical implicationsRegardless of the issue of the “grease” vs the “sand the wheels” debate, corruption should be reduced because it is anyway harmful for human development. The differences in the results for Latin American and Nordic countries show that the effects of corruption have to be assessed considering the different institutional and economic conditions of the countries analyzed.Social implicationsGovernments should seek to reduce corruption because, despite corruption can have mixed effects on economic growth in some contexts, it is anyway harmful for human development. Besides, the finding that in some Latin American countries more activity in the extractive industries is generated by means of corruption confirm the association between corruption and extractivism found by Gudynas (2017) and can explain why there are issues of environmental damage and social conflict linked to natural resources in those countries.Originality/valueThe present study contributes to the literature by presenting evidence on the effects of corruption on growth, human development and natural resources sector in Latin American and Nordic countries. It is the first study on economics of corruption which directly compares Latin American and Nordic countries. This is relevant because there are important differences between both regions since Latin American countries tend to suffer from widespread corruption, while the Nordic ones have a high level of transparency. It is also the first in using a Bayesian panel VAR approach in order to evaluate the effects of corruption.

Energy poverty remains a persistent challenge in many developing economies, constraining socioeconomic development and diminishing quality of life. This study examines the impact of foreign direct investment (FDI) and trade openness (TO) on energy poverty reduction in seven Latin American countries—Belize, Bolivia, Honduras, Mexico, Nicaragua, Panama, and Peru—over the period 1992–2024. Employing a Panel Vector Autoregression (PVAR) framework, the analysis reveals that both FDI and trade openness significantly enhance electricity access, which serves as a key proxy for energy poverty. Specifically, a 1% increase in trade openness leads to a 0.083% improvement in electricity access, while FDI exerts a substantially stronger effect, increasing access by 2.325%. Economic growth also contributes to energy poverty alleviation, albeit with a more modest elasticity of 0.195%. Granger causality tests indicate bidirectional causal relationships between trade openness and energy poverty, as well as between energy poverty and FDI inflows, suggesting the presence of a virtuous cycle whereby improved energy access fosters deeper economic integration. Additional feedback effects are identified between trade openness and economic growth, and between FDI and economic growth. Moreover, trade openness is found to directly stimulate FDI inflows, while economic growth unidirectionally reduces energy poverty. The robustness of these findings is confirmed through FMOLS and DOLS estimations. Overall, the results highlight the critical role of globalization in alleviating energy poverty in Latin America. Policy implications emphasize the need to reduce trade barriers for renewable energy technologies, promote green-oriented FDI, and channel economic growth toward expanding rural electrification. Nonetheless, the study’s reliance on electricity access as a single proxy for energy poverty and its regional focus point to avenues for future research, including the use of multidimensional energy poverty indices and cross-regional comparative analyses. Keywords: Energy poverty; electricity access; trade openness; foreign direct investment; globalization; Latin America.

BackgroundEnvironmental pollution seriously endangers people’s physical and mental health, especially the health of middle-aged and elderly people. Environmental pollution, trade openness, and population health are interconnected. Environmental pollution may have a nonlinear impact on health, and the impact of trade openness on the health effects of environmental pollution may not be a simple strengthening or weakening effect. However, few studies have used threshold effects model to explore the nonlinear mechanisms of environmental pollution’s impact on health in China. As a result, this study incorporates trade openness into the research framework on the health effects of environmental pollution, aiming to study the mechanism of environmental pollution on health.MethodsUsing the China Health and Retirement Longitudinal Study (CHARLS) data from 2013 to 2020 and the data of 111 prefecture-level cities in China, we combine two-way fixed-effects models and threshold models to explore the effects of environmental pollution on the health of middle-aged and elderly people and the role of trade openness in the path of environmental pollution affecting health.ResultsEnvironmental pollution impairs the health of middle-aged and elderly people, and there is a single threshold effect and regional heterogeneity in this negative impact. Trade openness has the effect of first weakening and then strengthening in the inhibitory effect of environmental pollution on health.ConclusionThe negative impact of environmental pollution on health has regional heterogeneity, and there is a nonlinear relationship between environmental pollution and the health of middle-aged and elderly people. The health effect of environmental pollution is mainly long-term effect, and trade openness has a threshold effect on the impact of environmental pollution on health. Therefore, instead of adopting a one-size-fits-all policy, environmental and economic policies should be customized according to the degree of environmental pollution, trade openness, and regional variations, so as to safeguard the health of middle-aged and elderly individuals through effective environmental governance.

Purpose This study aims to explore how trade openness moderates the effects of fixed and mobile broadband penetration on technological catch-up of emerging market economies. Design/methodology/approach The study used data from three sources: Penn World Table, World Bank World Development Indicators and International Telecommunication Union databases for the period between 2000 and 2019. The empirical evidence is based on feasible generalized least squares, panel-corrected standard errors and bias-corrected dynamic regression. Findings The main findings are as follows. First, both fixed and mobile broadband penetrations play significant roles in enhancing the process of technological catch-up among the countries. They speed up the process of technological transfer and improve the absorption capacity of the countries to transfer, decode and appropriately apply foreign technology in their countries. Second, trade openness is found to significantly moderate the effect of fixed broadband penetration, but it does not moderate the effect of the mobile one. Research limitations/implications The major research limitation is that findings are based on 15 emerging economies, which can limit generalizability. Total factor productivity growth measures efficiency improvements but no other aspects of technological progress, such as innovation in products or processes. Data discrepancy between fixed and mobile broadband limits results’ comparability between the broadband types. Practical implications The implications of the findings relate to the fact that governments should invest in broadband infrastructure to ensure fast, affordable and competitive internet access across all sectors and regions. Trade liberalization should be prioritized to enhance the benefits of globalization and support technological catch-up. Originality/value This study adds to the literature by providing fresh insight into the role of openness in moderating the effect of broadband penetration on technological catch-up, using panel data for emerging countries drawn from Asia, Europe, Latin America and Africa.

Amidst on the debate of the trade openness (TO) importance in influencing an economic growth (EG) and the central bank policy rate (CBPR), it is necessary to analyze the long-term relationship by using ARDL. This paper aims to analyze the CBPR and TO influence on EG in ASEAN -3. This study examines the EG model which focuses on the effect of CBPR and the ratio of exports in which plus imports divided by GDP as a measure of TO in ASEAN-3. The Data was collected from IFS for Indonesia, Philippines and Thailand for the period 2007q1-2022q2. The ARDL test method is used to determine the long-term relationship among the EG, TO and CBPR variables with different degrees of the integration. The FMOLS, DOLS, and CCR testing is for check robustness. The study show that CBPR has a positive effect on the EG in ASEAN-3, although it is only in Indonesia, and in Philippines which is statistically significant. The TO positive effect on the EG in Indonesia and in Thailand, but it is not significant and it has a TO statistically significant negative effect on EG in Philippines. The importance of this research given the recent interest in globalization activities, so the role of TO has become very important. A better TO understanding whether import dominance or vice versa helps in understanding the impact of globalization on the country economy. This finding emphasizes on the export importance over the imports in the economy. However, there is not an academic research looks at the long-term relationship between monetary policy and trade openness on the economic growth with the various econometric models.

A promising potential partner for the Latin American region is Canada, which is also interested in diversifying its economy and strengthening investment and trade ties. But the closest economic ties have developed between Canada, the United States and Mexico, which is due not only to geographical proximity, but also to participation in the North American Free Trade Agreement - NAFTA, and later USMCA. The subject of the study in the article is Canada's trade cooperation with Latin and North American countries. The aim is to study the economic and trade relations of Canada and Latin American countries in the context of North American integration from the point of view of a holistic view of their evolution. Methods: in studying the model of economic integration, the historical method and comparative analysis were used; statistical analysis was used to analyze the trends in the development of trade cooperation between Canada and Latin American countries. The following results were obtained: based on the analysis, it is noted that the development of economic and trade relations between Canada and Latin American countries almost completely corresponds to the interests of Canada, which wants to get a quick return on its investments in the region. Latin America appreciates working with Ottawa in key areas, actively using Canadian investments in the industrial and social spheres. But the closest economic ties have developed between Canada, the USA and Mexico, which is due not only to geographical proximity, but also to their economic integration, which was regulated by various documents - NAFTA and USMCA. Conclusions: Canada considers the Latin American region as a rather promising direction of development due to the richness of economic relations, the volume of trade turnover is quite stable, and today there are hardly any factors that can influence this trend. At the same time, the closest economic ties are developing between Canada, the USA and Mexico within the framework of the USMCA integration agreement and their intensification is given special attention, taking into account new requirements.

This paper studies the convergence of environmental sustainability and its main determinants in selected American countries. In addition, it studies the impact of economic activity, income inequality, trade openness, and innovative activity on the sustainability of these countries. Convergence tests such as unit root and club convergence are applied. Furthermore, cointegration and causality tests are used, and long-term parameters are estimated using methods robust for cross-sectional dependence. The results show evidence of stochastic convergence with the univariate unit root tests in the five indicators (energy consumption, carbon dioxide emissions, ecological footprint, energy intensity, and load capacity factor) used, while with the panel data unit root tests only in four (carbon dioxide emissions, ecological footprint, energy intensity, and load capacity factor). There is no evidence of convergence towards a single club considering the complete sample, but there is evidence of convergence towards several clubs. The variables are integrated of order one and are cointegrated. Moreover, using robust estimators in the presence of cross-sectional dependence in long-term economic activity, income inequality, trade openness, and innovative activity deteriorate sustainability, while renewable energy improves it in these countries.