Abstract
Abstract: This research investigates the impacts of economic integration on endogenous growth by an application of the AK learning-by-doing model. Assuming that the knowledge that increases the productivity of labor will be created by accumulated capital, we divide economic integration into two different categories: one-way and two-way integration. The results show that two identical countries cannot have any benefits from economic integration. If two countries are different, the domestic country should only integrate with foreign countries that have a lower cost of capital of wage, or higher learning coefficient (the speed of transferring accumulated capital to knowledge) in the case of one-way integration. The same conclusion is still drawn in the case of two-way integration for two similar countries.
Keywords: economic integration, endogenous growth, AK model
References
- Aghion, P., & Howitt, P. (1992), The Schumpeterian approach to technical change and growth, Paper presented at the Economic Growth in the World Economy: Symposium.
- Aghion, P., Howitt, P., Howitt, P. W., Brant-Collett, M., & García-Peñalosa, C. (1998), Endogenous growth theory: MIT press.
- Anwar, S., & Nguyen, L. P. (2011), Financial development and economic growth in Vietnam, Journal of Economics and Finance, 35(3), 348–360.
- Arrow, K. J. (1962), The economic implications of learning by doing, The review of economic studies, 29(3), 155–173.
- Badinger, H. (2005), Growth effects of economic integration: evidence from the EU member states, Review of World Economics, 141(1), 50–78.
- Barro, R. J. (1990), Government spending in a simple model of endogeneous growth, Journal of political Economy, 98(5, Part 2), S103–S125.
- Bende‐Nabende, A., Ford, J., & Slater, J. (2001), FDI, regional economic integration and endogenous growth: Some evidence from Southeast Asia, Pacific economic review, 6(3), 383–399.
- Borensztein, E., De Gregorio, J., & Lee, J.-W. (1998), How does foreign direct investment affect economic growth?, Journal of international Economics, 45(1), 115–135.
- Devereux, M. B., & Lapham, B. J. (1994), The stability of economic integration and endogenous growth, The Quarterly Journal of Economics, 109(1), 299–305.
- Edison, H. J., Levine, R., Ricci, L., & Sløk, T. (2002), International financial integration and economic growth, Journal of international money and finance, 21(6), 749–776.
- Grossman, G. M., & Helpman, E. (1991), Trade, knowledge spillovers, and growth, European economic review, 35(2–3), 517–526.
- Lucas Jr, R. E. (1988), On the mechanics of economic development, Journal of monetary economics, 22(1), 3–42.
- Mankiw, N. G., Romer, D., & Weil, D. N. (1992), A contribution to the empirics of economic growth, The Quarterly Journal of Economics, 107(2), 407–437.
- Rivera-Batiz, L. A., & Romer, P. M. (1991), Economic integration and endogenous growth, The Quarterly Journal of Economics, 106(2), 531–555.
- Romer, P. M. (1986), Increasing returns and long-run growth, Journal of political Economy, 94(5), 1002–1037.
- Romer, P. M. (1990), Endogenous technological change, Journal of political Economy, 98(5, Part 2), S71–S102.
- Solow, R. M. (1956), A contribution to the theory of economic growth, The Quarterly Journal of Economics, 70(1), 65–94.
- Swan, T. W. (1956), Economic growth and capital accumulation, Economic record, 32(2), 334–361.
- Takahashi, H., & Sakagami, T. (1998), Transitional dynamics of economic integration and endogenous growth, Journal of economic behavior & organization, 33(3–4), 543–555.
- Villanueva, D. (1994), Openness, human development, and fiscal policies: Effects on economic growth and speed of adjustment, Staff Papers, 41(1), 1–29.