Globalization, economic growth, and spillovers: A spatial analysis

Ahmad, Mahyudin (2018): Globalization, economic growth, and spillovers: A spatial analysis.

Abstract

This paper seeks to deepen our understanding of the globalization-growth nexus as it extends the investigation to using a spatial econometric approach, hitherto has been rarely used in the globalization literature. The objective of the paper is to uncover not only the significant growth-effects of globalization, but also the possible spillover effects of globalization onto neighbouring countries. Using a panel dataset of 83 countries and 30-year period and via a spatial autoregressive panel data method, this paper estimates a standard growth model augmented with a parameter to capture the countries’ spatial dependence, whilst controlling for globalization indices. The findings indicate a positive effect of economic globalization and the effect is dependent upon the political settings in the countries under study. The spillover effects of globalization across neighbouring countries are shown, both in geographical and institutional spheres. The paper concludes with some policy recommendations.

• Item Type: MPRA Paper
• Language: English
• Keywords: globalization, economic growth, institutional quality, spatial autooregressive model
• Subjects: C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C31 - Cross-Sectional Models ; Spatial Models ; Treatment Effect Models ; Quantile Regressions ; Social Interaction Models; F - International Economics > F6 - Economic Impacts of Globalization > F63 - Economic Development; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O43 - Institutions and Growth

References

Acemoglu, D., Johnson, S., & Robinson, J. A. (2001). The Colonial Origins of Comparative Development : An Empirical Investigation. The American Economic Review, 91(5), 1369–1401. https://doi.org/10.1257/aer.91.5.1369

Acemoglu, D., Johnson, S., & Robinson, J. A. (2002). Reversal of Fortune: Geography and Institutions in the Making of the Modern World Income Distribution*. Source: The Quarterly Journal of Economics, 117(4), 1231–1294. Retrieved from http://www.jstor.org/stable/4132478

Acemoglu, D., Johnson, S., & Robinson, J. A. (2005). Institutions as a Fundamental Cause of Long-Run Growth. In P. Aghion & S. N. Durlauf (Eds.), Handbook of Economic Growth (Vol. 1A, pp. 386–471). Elsevier B.V. https://doi.org/10.1016/S1574-0684(05)01006-3

Ahmad, M., & Hall, S. G. (2012a). Institutions-growth Spatial Dependence: An Empirical Test. Procedia - Social and Behavioral Sciences, 65, 925–930. https://doi.org/10.1016/j.sbspro.2012.11.221

Ahmad, M., & Hall, S. G. (2012b). Institutions and growth: Testing the spatial effect using weight matrix based on the institutional distance concept. MPRA Paper, 6356. Retrieved from http://ideas.repec.org/p/pra/mprapa/42294.html

Ahmad, M., & Hall, S. G. (2017). Economic growth and convergence: Do institutional proximity and spillovers matter? Journal of Policy Modeling. https://doi.org/10.1016/j.jpolmod.2017.07.001

Alesina, A., Devleeschauwer, A., Easterly, W., Kurlat, S., & Wacziarg, R. (2003). Fractionalization. Journal of Economic Growth, 8(2), 155–194. https://doi.org/10.1023/A:1024471506938

Alesina, A., & Perotti, R. (1994). The Political Economy of Growth: A Critical Survey of the Recent Literature. The World Bank Economic Review, 8(3), 351–371. https://doi.org/10.1093/wber/8.3.351

Anselin, L., Bera, A., Florax, R., & Yoon, M. (1996). Simple diagnostic tests for spatial dependence. Regional Science and Urban Economics, 26(1), 77–104. Retrieved from http://www.sciencedirect.com/science/article/pii/0166046295021116

Anselin, L., Gallo, J. Le, Jayet, H., Le Gallo, J., & Jayet, H. (2008). Spatial panel econometrics. The Econometrics of Panel Data, 46, 625–660. https://doi.org/0.1007/978-3-540-75892-1_19

Arbia, G., Battisti, M., & Di Vaio, G. (2010). Institutions and geography: Empirical test of spatial growth models for European regions. Economic Modelling, 27(1), 12–21. https://doi.org/10.1016/j.econmod.2009.07.004

Barro, R. J., & Lee, J. W. (2013). A new data set of educational attainment in the world, 1950–2010. Journal of Development Economics, 104, 184–198. https://doi.org/10.1016/j.jdeveco.2012.10.001

Beck, N., Gleditsch, K. S., & Beardsley, K. (2006). Space is more than geography: Using spatial econometrics in the study of political economy. International Studies …, 50(1), 27–44. https://doi.org/10.1111/j.1468-2478.2006.00391.x

Borensztein, E., De Gregorio, J., Lee, J.-W., Barro, R., Helpman, E., Jovanovic, B., Wickham, P. (1998). How does foreign direct investment affect economic growth? Journal of International Economics, 45(45), 115–135. Retrieved from https://www.olemiss.edu/courses/inst310/BorenszteinDeGLee98.pdf

Calderón, C., & Poggioa, V. (2010, September 1). Trade and Economic Growth: Evidence on the Role of Complementarities for Cafta-Dr Countries. Retrieved from https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1680134

Central Intelligence Agency, T. (2013). The World Factbook 2013-2014. Washington DC. Retrieved from https://www.cia.gov/library/publications/the-world-factbook/index.html

Dollar, D. (1992). Outward-oriented developing economies really do grow more rapidly: evidence from 95 LDCs, 1976–1985. Economic Development and Cultural Change, 40, 523–544.

Dreher, A. (2006). Does globalization affect growth? Evidence from a new index of globalization. Applied Economics, 38(10), 1091–1110. https://doi.org/10.1080/00036840500392078

Dreher, A., Gaston, N., & Martens, W. J. M. (2008). Measuring globalisation : gauging its consequences. Springer. Retrieved from https://books.google.com.my/books?id=cieBVeRR8hYC&dq=Dreher,+A.,+Gaston,+N.,+%26+Martens,+P.+(2008).+Measuring+globalisation+–+gauging+its+consequences.+New+York:+Springer.&lr=&source=gbs_navlinks_s

Easterly, W., Ritzen, J., & Woolcock, M. (2006). Social Cohesion, Institutions, and Growth. Economics and Politics, 18(2), 103–120.

Edwards, S. (1998). Openness, productivity and growth: what do we really know? Economic Journal, 108, 383–398.

Elhorst, J. P. (2003). Specification and Estimation of Spatial Panel Data Models. International Regional Science Review, 26(3), 244–268. https://doi.org/10.1177/0160017603253791

Elhorst, J. P. (2009). Spatial Panel Data Models. In M. M. Fischer & A. Getis (Eds.), Handbook of Applied Spatial Analysis (pp. 377–407). Springer. https://doi.org/10.1007/978-3-642-03647-7_19

Elhorst, J. P. (2010). Applied Spatial Econometrics: Raising the Bar. Spatial Economic Analysis, 5(1), 9–28. https://doi.org/10.1080/17421770903541772

Florax, R. J., Folmer, H., & Rey, S. J. (2003). Specification searches in spatial econometrics: the relevance of Hendry’s methodology. Regional Science and Urban Economics, 33(5), 557–579. Retrieved from http://www.sciencedirect.com/science/article/pii/S0166046203000024

Glaeser, E. L., & Shleifer, A. (2002). Legal Origins. The Quarterly Journal of Economics, 117(4), 1193–1229. https://doi.org/10.1162/003355302320935016

Grossman, G. M., & Helpman, E. (2015). Globalization and growth. American Economic Review, 105(5), 100–104. https://doi.org/10.1257/aer.p20151068

Gurgul, H., & Lach, Ł. (2014). Globalization and economic growth: Evidence from two decades of transition in CEE. Economic Modelling, 36, 99–107. https://doi.org/10.1016/j.econmod.2013.09.022

Hadenius, A., & Teorell, J. (2007). Pathways from Authoritarianism. Journal of Democracy, 18(1), 143–156. Retrieved from http://www.journalofdemocracy.org/article/pathways-authoritarianism-0

Ho, C. Y., Wang, W., & Yu, J. (2013). Growth spillover through trade: A spatial dynamic panel data approach. Economics Letters, 120, 450–453. https://doi.org/10.1016/j.econlet.2013.05.027

La Porta, R., Lopez-de-Silanes, F., & Shleifer, A. (2008). The Economic Consequences of Legal Origins. Journal of Economic Literature, 46(2), 285–332. https://doi.org/10.1257/jel.46.2.285

La Porta, R., Lopez-de-Silanes, F., Shleifer, A., & Vishny, R. W. (1998). Law and Finance. The Journal of Political Economy, 106(6), 1113–1155.

Le Gallo, J., & Ertur, C. (2003). Exploratory spatial data analysis of the distribution of regional per capita GDP in Europe , 1980 – 1995. Papers in Regional Science, 201(2), 175–201. https://doi.org/10.1111/j.1467-8276.2006.00866.x

LeSage, J. P., & Pace, R. K. (2009). Introduction to spatial econometrics. Chapman and Hall/CRC Press.

Marshall, M. G., & Jaggers, K. (2014). Polity IV Project: Political Regime Characteristics and Transitions 1800-2014. Retrieved from http://www.systemicpeace.org/polity/polity4.htm

North, D. C. (1990). Institutions, Institutional Change and Economic Performance. Cambridge: Cambridge University Press. https://doi.org/10.1017/CBO9780511808678

Rao, B. B., & Vadlamannati, K. C. (2011). Globalization and growth in the low income African countries with the extreme bounds analysis. Economic Modelling, 28, 795–805. https://doi.org/10.1016/j.econmod.2010.10.009

Rodriguez, F., & Rodrik, D. (2000). Trade policy and economic growth: a skeptic’s guide to the cross-national evidence. NBER Macroeconomics Annual, 15, 261–325.

Rodrik, D. (1998). Who needs capital account convertibility? In S. Fischer (Ed.), Should the IMF pursue capital account covertibility? Essays in international finance (pp. 55–65). Princeton: Department of Economics, Princeton University.

Sachs, J. D., Warner, A., Aslund, A., & Fischer, S. (1995). Economic reform and the process of global integration. Brookings Papers in On Economic Activity, 1–118.

Samimi, P., & Jenatabadi, H. S. (2014). Globalization and economic growth: Empirical evidence on the role of complementarities. PLoS ONE, 9(4), 1–7. https://doi.org/10.1371/journal.pone.0087824

Shehata, E. A. E., & Mickaiel, S. K. A. (2013). SPREGFEXT: Stata module to compute Spatial Panel Fixed Effects Regression: Lag and Durbin Models. Statistical Software Components, S457524. Retrieved from https://ideas.repec.org/c/boc/bocode/s457524.html

Stiglitz, J. E. (2004). Globalization and growth in emerging markets. Journal of Policy Modeling, 26(4), 465–484. https://doi.org/10.1016/j.jpolmod.2004.04.010 Wikipedia. (2016). List of official languages by country and territory. Retrieved from https://en.wikipedia.org/wiki/List_of_official_languages_by_country_and_territory

World Bank, T. (2016). World Development Indicators.