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Evidence on the Contribution of Trade Reform Towards International Income Equilization
Author(s) -
BenDavid Dan,
Bohara Alok K.
Publication year - 1997
Publication title -
review of international economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.513
H-Index - 58
eISSN - 1467-9396
pISSN - 0965-7576
DOI - 10.1111/1467-9396.00054
Subject(s) - economics , convergence (economics) , estimation , econometrics , international economics , free trade , liberalization , seemingly unrelated regressions , bilateral trade , monte carlo method , international trade , macroeconomics , mathematics , statistics , geography , china , market economy , management , archaeology
This paper provides some historical evidence on the impact of trade reform on income disparities between the liberalizing countries. The convergence test developed here involves joint estimation of augmented Dickey‐Fuller type equations using seemingly unrelated regression (SUR) techniques. Monte Carlo simulations are used to calculate the critical values which are in turn used to determine the significance of convergence. We find that countries which embarked on extensive trade liberalization programs exhibited significant income convergence with one another while countries that did not liberalize trade showed no evidence of convergence.