Effect Of Trade Openness Research Articles

Long-Run and Short-Run Effects of Trade Openness on Life Quality in Sub-Saharan Africa

This paper contributes to the understanding of the other neglected effects of trade openness by analysing how it affects life quality in sub-Saharan African countries over the period 2000–2016. We used two trade openness indicators, namely: Squalli and Wilson index and the rate of trade. The empirical evidence is based on a pooled mean group approach. With two panels differentiated by their colonial origin, the following findings are established: the trade openness variable measured by Squalli and Wilson index has no effect on life quality in the both groups of countries in the short-run. However, it has a positive and significant effect on life quality in the both group of countries in the long-run. The use of the rate of trade confirms the results in the both groups of countries in the long-run. The contribution of trade openness to life quality is 3.27 and 5.19 times higher in the Former British Colonies than that recorded in the Former French Colonies of SSA respectively to the use of Squalli and Wilson index and the rate of trade. Overall, we find strong evidence supporting the view that trade openness promotes life quality in SSA countries in the long run.

Analysis of spatio-temporal drivers and convergence characteristics of urban development in Africa

Understanding the trajectory of urbanization and its drivers is particularly important in the new urban agenda set out under sustainable development goal 11 on cities and human settlements. This is particularly relevant in Africa, where the urban transition process is advancing faster than anywhere else in the world. In this regard, we examine (i) the Spatio-temporal patterns of urbanization, (ii) the drivers of convergence behaviors among African countries. The empirical analysis reveals that there is a significant spatial correlation in Africa’s urbanization trajectory. There is also evidence that both σ-convergence and β-convergence exist among our panel members over 2000–2018. The speed of convergence increases substantially when the role of socio-economic triggers of urbanization is considered. Moreover, among the determinants of conditional β-convergence, we show that natural resource rents and population contribute to urbanization significantly, while the effect of trade openness is insignificant. We also find that the relationship between urbanization and growth is inverted U-shaped, indicating that urbanization may decrease once a critical tipping point is breached. We demonstrate that accounting for spatial factors is essential to capture key features of urban evolution in Africa.

Effects of trade openness on renewable energy consumption in OECD countries: New insights from panel smooth transition regression modelling

This paper investigates the effects of trade openness on renewable energy consumption in 35 OECD countries for the period between 1999 and 2018. A panel smooth transition regression model is built. Imports, exports, and total trade are used as proxy variables of trade openness. To reduce the error of omitted variables, a control variable pool is constructed, consisting of foreign direct investment, access to electricity, international remittances, GDP per capita, domestic inflation rate, and carbon emissions. The empirical results demonstrate the existence of a strongly nonlinear relationship between trade openness and renewable energy consumption. In terms of imports, three structural breakpoints are identified: 33.732, 40.945, and 76.395. When the imports reach 40.945% of the GDP, their effect on renewable energy consumption will switch from promoting to inhibiting. Both exports and total trade have one structural breakpoint and can constantly promote renewable energy consumption. The analyses on the temporal and spatial variations of the effects show that imports, exports, and total trade all positively impacts renewable energy consumption between 1999 and 2018. Their effects first follow a downward trend, which later change to an upward trend. Imports, exports, and total trade exert the least impact on renewable energy consumption of OECD Asia Oceania. Regarding specific countries, exports and total trade most strongly impact the renewable energy consumption in Mexico and exert the least impact on the renewable energy consumption of the United States.

Shock propagation channels behind the global economic contagion network. The role of economic sectors and the direction of trade.

Examining the spread of macroeconomic phenomena between countries has become increasingly popular after the 2008 economic crisis, but the recent COVID-19 pandemic rendered this issue much more relevant as it shed more light on the risks arising from strongly interconnected economies. This paper intends to extend previous studies in this line by examining the relationship between trade openness and business cycle synchronization. It extends the scope of previous analyses in three areas. First, we use a Granger-causality approach to identify synchronization. Second, trade is broken down to the sector level and third, we distinguish between upstream and downstream connections. These developments allow for a directed approach in the analysis. We use conditional logit regressions to estimate the effect of trade openness on the probability of shock-transmission. The results presented in this study contribute to the literature in two ways. First, in addition to revealing a positive effect of aggregate two-way trade on shock-contagion, it also points out that this overall effect hides diverse behavior in specific trading sectors as well as upstream and downstream channels. Second, while some sectors are not significant channels of shock-transmission in either directions, upstream channels seem to be important in agriculture while downstream channels dominate machinery and other manufactures. Also, there are sectors (chemicals and related products) trade in which affects shock-transmission negatively.

Trade openness and financial development in sub‐Saharan Africa: The role of institutional structures

AbstractThis article examines the role of institutional structures in the relationship between trade openness and financial development in sub‐Saharan economies. The study is based on empirical data from sampled sub‐Saharan African countries for a period of 1996–2017. The system generalized method of moment was employed to estimate the models. The findings suggest that, even though trade openness has a positive significant influence on the level of financial development in sub‐Saharan African economies, this relationship is enhanced through the presence of good institutions in these economies. Thus, for these economies to realize the full benefit of the effect of trade openness on financial development, they need to strengthen their institutions.

Effect of Trade Openness, Customs Tariff, Financial Penalty, and Regional Trade Agreement on Trade Misinvoicing

Trade misinvoicing is one of the illegal practices hiding behind legal trade with the purpose of tax evasion and capital flight. It is estimated that Indonesia had a potential loss of $6.5 billion in state revenue linked to trade misinvoicing in 2016. This study aims to obtain empirical evidence on the factors affecting trade misinvoicing, namely trade openness, customs tariff, financial penalty, and trade agreement in trade activities between Indonesia and its trading partner countries. The analysis was conducted on 83 trade partner countries listed on the UN Comtrade from 2010 to 2019 which were selected through a purposive sampling method; thus 830 observations were obtained. This study engages two-panel data regression models, namely a model with import misinvoicing and export misinvoicing as a proxy for trade misinvoicing. The results of this study indicate that customs tariffs, financial penalties, and trade agreements affect import misinvoicing. Furthermore, customs tariffs and financial penalties affect export misinvoicing. Meanwhile, trade openness does not affect trade misinvoicing, both from the import and export side. Keywords: customs tariff, financial penalty, trade agreement, trade openness, trade misinvoicing Trade misinvoicing merupakan salah satu praktik ilegal yang bersembunyi dibalik perdagangan yang sah dengan tujuan penghindaran pajak dan pelarian modal yang mengakibatkan Indonesia mengalami potensi kehilangan penerimaan sebesar $6,5 miliar pada tahun 2016. Penelitian ini bertujuan untuk mendapatkan bukti empiris mengenai pengaruh faktor trade openness, customs tariff, financial penalty, dan trade agreement terhadap trade misinvoicing yang terdapat pada perdagangan antara Indonesia dan negara mitra dagangnya. Analisis dalam penelitian ini dilakukan terhadap 83 negara mitra dagang yang tercatat di UN Comtrade selama kurun waktu 2010 s.d. 2019 dengan metode purposive sampling, sehingga diperoleh 830 observasi. Penelitian ini menggunakan dua model regresi data panel, yaitu model dengan import misinvoicing dan export misinvoicing sebagai proksi dari trade misinvoicing. Hasil penelitian ini menunjukkan bahwa customs tariff, financial penalty, dan trade agreement berpengaruh terhadap import misinvoicing. Selanjutnya, customs tariff dan financial penalty berpengaruh terhadap export misinvoicing. Sedangkan trade openness tidak berpengaruh terhadap trade misinvoicing baik dari sisi impor maupun ekspor. Kata kunci: customs tariff, financial penalty, trade agreement, trade openness, trade misinvoicing

Electricity Consumption in China: The Effects of Financial Development and Trade Openness

As China is facing the double pressure of economic growth as well as energy-saving and reduction of emissions, reducing electricity consumption without affecting economic development is a challenging and critical issue. Based on 31 provincial panel’s data in China from 2004 to 2018, this study empirically analyzes the direction and degree of the impact of financial development and trade openness on electricity consumption using the spatial econometric approach and panel vector autoregression (PVAR) model. The results indicate that China’s electricity consumption presents a significant spatial spill over effect, and the spatial agglomeration of electricity consumption in local regions is mainly HH clusters. A 1% positive change in financial development causes an increase of 0.089% in electricity consumption, but a 1% rise in financial development reduces electricity consumption of neighboring regions by 0.051%. A 1% positive change in trade openness decreases electricity consumption by 0.051%, while the spatial spillover effect of trade openness is not significant. It is also found that financial development has a long-term promoting effect on electricity consumption, while trade openness has a long-term inhibiting effect on electricity consumption.

Challenges in Trade openness, Governance and Industrial Productivity in West African Economic and Monetary Union (WAEMU) Countries

Inward-looking development strategies can lead to marginalization and slow growth especially for the small African domestic markets. However, when weak economies try to participate in the global economy studies in Southeast Asia show they end with significant challenges. Therefore, this paper analyzed the effects of trade openness on industrial development in West African Economic and Monetary Union (WAEMU) countries. However, due to data availability, the study covered seven countries over the 1996 – 2018 period. The pooled-mean group method was used in the analysis. The results of the analysis showed that, in the long run, trade openness did not benefit the development of the industrial sector in all the countries studied. However, in the short run, the results revealed the specificities of each country. These short-run results showed that trade openness has a positive and significant effect on the industry added values observed in countries such as Burkina Faso, Niger and Togo. The results also showed that government inefficiency has a negative impact on the development of the industrial sector in the long -run for all the countries studied. Furthermore, the indicator capturing the degree of freedom of corruption had a positive impact on the development of the industrial sector in the short or long run. Therefore, active engagement with the forces of globalization need strategic approaches in their integration in developing countries.

Trade openness and income inequality: New empirical evidence

AbstractWe examine how trade openness influences income inequality within countries. The sample includes 139 countries over the period 1970–2014. We employ predicted openness as instrument to deal with the endogeneity of trade openness. The effect of trade openness on income inequality differs across countries. Trade openness tends to disproportionately benefit the relative income shares of the very poor, but not necessarily all poor, in emerging and developing economies. In most advanced economies, trade openness increased income inequality, an effect that is driven by outliers. Our results suggest a strong effect of trade openness on inequality in China and transition countries.

The asymmetric effects of renewable energy consumption and trade openness on carbon emissions in Sweden: new evidence from quantile-on-quantile regression approach.

With the passage of time, the continued burning of fossil fuels is proving to be one of the world's most serious issues. In response, the current research aims to assess the critical linkage between carbon emissions and renewable energy, trade openness, and economic growth in Sweden utilizing a dataset from 1965 to 2019. The study applied the novel quantile-on-quantile regression (QQ) approach to assess this relationship. The main objectives are to address the following questions: (i) What are the effects of trade openness on CO2 emissions in each quantile? (ii) Does renewable energy consumption mitigates CO2 emissions in each quantile? What is the impact of economic growth on CO2 emissions in each quantile? The outcomes from the QQ approach revealed that at low and medium quantiles (0.1-0.6), the effect of trade openness on CO2 emissions is negative. Furthermore, at lower and higher quantiles (0.1-0.90) of combination of renewable energy consumption and CO2 emissions, the effect of renewable energy consumption on CO2 emissions is negative. Finally, at majority of the quantiles, the effect of economic growth on CO2 emissions is negative. Moreover, the present study applied the quantile regression (QR) approach as a robustness check. The findings of the QR validate the findings of the QQR approach. The study proposes that policy-makers in Sweden should place greater emphasis on raising public awareness regarding the issues of renewable energy since it mitigates environmental degradation.

Assessing the impact of trade openness on CO2 emissions: Evidence from China-Japan-ROK FTA countries

After signing the Regional Comprehensive Economic Partnership trade agreement, China became a proposed signatory to another important trilateral free-trade agreement – the China-Japan-South Korea Free Trade Agreement. In the context of the agreement, we explore the potential effect and internal influencing mechanism of trade openness on this region's carbon emissions from 1970 to 2019. We further detect the impact of the agreement by splitting the full sample into two subsamples, one subperiod before the agreement was signed and the other after it was signed. Then we separately analyze the impacts of imports and exports on carbon emissions and find that: (i) Trade openness positively affects the greenhouse effect, and the signing of the agreement can reduce the promotion effect of trade openness on carbon emissions; (ii) imports contribute to increased carbon emissions while exports significantly reduce carbon emissions in a country; and (iii) expanding trade openness not only directly affects carbon emissions directly, but also has indirect impacts by affecting three main effects (i.e., scale effect, technical effect, and structure effect). Finally, several important policy suggestions are provided to mitigate the greenhouse effect and promote high-quality trade openness.

Environmental Effects of Trade Openness in the Presence of Structural Breaks: New Insights from 5-ASEAN Developing Countries

Environmental Effects of Trade Openness in the Presence of Structural Breaks: New Insights from 5-ASEAN Developing Countries

Economic integration and economic complexity: The role of basic resources in absorptive capability in 40 selected developing countries

This study investigates the influences of trade openness and FDI inflows on domestic economic complexity. In particular, the study analyses the roles of human capital, Internet usage, and energy poverty in these relationships. The analysis is carried out for two indices of economic complexity (ECI and ECI+) in a sample of 40 selected developing countries from 2002 to 2017. Applying a two-step system generalised method of moments estimate to deal with endogeneity, and predictive margins analysis to analyse the catalytic role of basic resources, four interesting findings emerge. First, trade openness has a positive impact on economic complexity, while FDI inflows have a negative impact. Second, human capital accumulation accelerates the effect of trade openness but does not have a catalytic role in the effect of FDI inflows. Third, the development of the Internet is found to be a new and important resource that boosts the positive impact of trade openness and, notably, turns positive the negative impact of FDI inflows. Fourth, the role of energy poverty reduction is mostly the same as Internet development. The alleviation of energy poverty and Internet development seem to be good policies for enabling developing countries to absorb spillovers from economic integration.

IS TRADE AGAINST OR IN FAVOR OF WOMEN? EMPIRICAL EVIDENCE FROM MANUFACTURING SECTOR IN TURKEY

This paper studies the effect of trade openness on relative wage earnings of female workers in Turkey’s manufacturing sector. We compute the export intensity of a sector by dividing the export value to production value as our measure of trade openness. Using Structure of Earnings Survey data for 2010 and 2014, we estimate the impact of export intensity on the gender wage gap. Our results indicate that a onepercentage point increase in the export intensity of a sector leads to a 0.17 percent higher gender wage gap. We further investigate the trade-gender wage gap link by grouping the sectors into four quartiles according to their export intensities. Our estimations for each quartile reinforce our finding of a negative impact of trade on the male-female wage inequality. Lastly, we analyze how the wage gap between men and women change according to skill levels. In line with the previous findings in the literature, we estimate a higher wage discrimination against high-skill women.

Institutional quality and risk in the banking system

Purpose This paper aims to offer an empirical study of the impact of institutional quality on the banking system risk and credit risk. Design/methodology/approach Applying cross-sectional dependent tests and stationary tests to check the property of our sample, the panel corrected standard errors model is recruited as the main estimator, while feasible generalized least squares, pool ordinary least squares (OLS), robust pool OLS and other estimators are used as a robustness check for an unbalanced panel data for 56 economies divided into three subsamples between 2002 and 2015. Findings The empirical results show several significant contributions. First, an improvement in institutional quality is an important factor to reduce the banking system risk. This effect of the institutions is less important in well-capitalized, highly profitable and in high-economic growth countries. This effect is also stronger in highly liquid banking systems. Notably, a better institutional quality helps to reduce the banking system risk in the highly concentrated banking system. Second, institutional quality has a significant negative relationship with the banking credit risk, especially in highly concentrated banking systems and in high-growth countries. This influence is weaker in highly liquid and well-capitalized banking systems. Finally, better institutions reduce the positive effect of trade openness, but it induces a higher credit risk for the banking system from the trade openness. Notably, a better institutional quality enhances the negative effect of foreign direct investment (FDI) inflow on both banking system risk and credit risk. These findings are documented for a global sample and three subsamples: low and lower-middle-income economies, upper-middle-income economies and high-income economies. Originality/value This study provides some recommendations, for policymakers, on the roles of institutions in the banking system and financial stability.

The effects of trade openness on rural-urban sectoral employment, wages, and earnings: Evidence from Peru's second wave of trade liberalization

The effects of trade liberalization on wages, inequality, and employment in middle-income countries remains an important empirical question. However, with few exceptions, most of the empirical literature has focused on aggregate impacts at a national or regional level and the effects on skilled versus unskilled workers. This paper focuses on the effects of trade liberalization on industry-specific wages, earnings, and employment in rural and urban areas of Peru, providing more nuanced evidence on the distributional effects of trade. We use an instrumental variable approach and different measures of trade liberalization for the 2001–2016 period. Our main results suggest that, first, trade openness is associated with an increase in urban workers’ earnings and wages, with self-employed workers benefitting the most. Second, whereas wages of workers with low and high levels of education decrease as a consequence of trade openness, the earnings of self-employed workers are affected positively, benefiting unskilled workers the most. In addition, while earnings increase in almost all industries in both rural and urban areas, effects are heterogeneous for wages. Overall, both salaried and self-employed agricultural workers benefitted from trade openness, indicative that agriculture is a competitive sector with important export potential.

Estimating the determinants and spatial effects of electricity intensity in China

Due to the continuous growth of China's electricity demand, the efficiency of electricity consumption has drawn great attention. Based on 31 provincial panel data in China from 2004 to 2018, this study uses the spatial autocorrelation test and spatial econometric methods to quantitatively identify the spatial distribution characteristics and the dominating driving factors of the electricity intensity. The results show that China's electricity intensity presents significant spatial dependence and clustering characteristics under different spatial weights, and the agglomeration types in backward areas and developed areas are mainly HH and LL clusters, respectively. According to the results of spatial Durbin model, urbanization have significant effects on reducing electricity intensity within a province, and industrialization, foreign direct investment (FDI) and financial development have the opposite impacts, while the direct effect of trade openness is not significant. Considering the spatial spillover effect, urbanization and financial development are found to significantly reduce electricity intensity in the surrounding provinces, and industrialization has the opposite impact, while the spatial spillover effects of FDI and trade openness are not significant. These conclusions offer some fruitful evidence for differential localized policy making related to reduction in electricity intensity.

Panel evidence of the dynamics between energy consumption and trade openness in ASEAN and East Asia

This paper investigated the dynamics between trade openness and energy consumption in five members of the Association of Southeast Asian Nations (ASEAN) and three East Asian countries from 1980 to 2014. Previous theoretical discussions and empirical findings pointed out that trade openness had ambiguous effects on energy consumption. A panel dataset involving energy consumption per capita, trade openness, real gross domestic product per capita, gross fixed capital formation per capita and foreign direct investment was estimated. The Lagrange multiplier (LM) cross-sectional dependence test confirms the existence of cross-sectional dependence among the cross-sectional units. Moreover, the Westerlund cointegration test showed that the variables were not cointegrated. Hence, the dynamics among the variables were explored using the panel vector autoregressive method. The results suggested that there is a unidirectional Granger causality from trade openness to energy consumption. Further, the impulse response functions implied that the effect of trade openness on energy consumption occurred via the dynamics between trade openness and gross capital formation per capita. Finally, the forecast error variance decomposition showed that the contribution of trade openness on energy consumption increased during the examined period.

EFFECT OF TRADE OPENNESS ON ECONOMIC GROWTH IN SUB-SAHARAN AFRICA: DYNAMIC PANEL ANALYSIS

Theoretically, proponents of traditional trade theories argue that trade openness can enhance economic growth by providing access to goods and services, achieving efficiency in allocation of resources through comparative advantage, creation of employment opportunities and generation of capital that leads to better living standards in terms of higher level of GDP per capita,trade openness may strengthen economic growth through different channels such as efficient allocation of resources. However, owing to the fact that there are limited studies on trade openness, various studies indicate divergent views on the effect of trade openness on economic growth. For this reason, it is not clear whether or not trade openness affect economic growth in Sub-Saharan Africa. The main objective of this study was to investigate the effect of trade openness on economic growth in Sub-Saharan Africa. Control variables used in the regression included oversees development assistance, population growth rate, domestic credit and foreign direct investment. Trade openness, inflation and capital stock were explanatory variables and economic growth the dependent variable. This study was modeled using the Neoclassical Growth theory. One- step difference Generalized Method of Moments results revealed that trade openness had a positive and significant effect on economic growth, capital stock positive and insignificant relationship, while inflation had positive and insignificant relationship with economic growth in SSA.The study thus recommends that there is a need for improving balance of trade by increasing exports diversification and balanced growth and the policy makers of SSA countries should have to give a priority for trade and investment policies which requires some reforms to adjust with changing economic environment. The study concluded that extra-regional trade spurs higher output than intra-regional trade. This may be due to lack of efficiency in the implementation of trade agreements among the intra-regional constituent countries such as Sub-Saharan African countries and lack of full commitment by the member states governments to trade more intensively. KEYWORDS: Trade openness, economic growth, Sub-Saharan Africa

The Effect of Trade Openness on Foreign Direct Investment in Vietnam

The Effect of Trade Openness on Foreign Direct Investment in Vietnam