Abstract
This paper investigates the impact of global integration on economic growth in a large group—BRICS and NEXT-11—of emerging countries and it tries to verify a possible different relation for the second group. The period of analysis is 1980–2015. Our hypothesis is that the impact of global integration (measured as foreign direct investment and share of trade as percentage of GDP) on economic growth is not only direct but also indirect through various other determinants of economic growth. Thus, by using panel data econometric estimation techniques, multiplicative models are estimated. Results show that global integration—both trade openness and FDI inflow—benefits economic growth. The coefficients are however higher in the BRICS group rather than in the complete sample.
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Notes
- 1.
Notice that exports of Russia and Brazil are much more dependent on raw materials and energy sources. The BRIC acronym was first employed by O’Neill (2001).
- 2.
It comprises Bangladesh, Egypt, Indonesia, Iran, Mexico, Nigeria, Pakistan, the Philippines, Turkey, South Korea, and Vietnam. These countries could potentially become some of the worlds’ largest economies.
- 3.
A negative impact of trading opening may be caused by the worsened income distribution. Nayyar (2015) argues that policies that have stressed more openness in trade, investment and finance, have dampened output growth through a deteriorated income distribution.
- 4.
- 5.
- 6.
These countries have some specific features; for instance, their liberalisations and opening to trade have been much faster (the so-called “shock therapy” adopted in the ‘90s) compared to the more gradual approaches of China and India (see Marelli and Signorelli 2010).
- 7.
- 8.
Lower income countries considered in the study are: India, Indonesia, Pakistan and Sri Lanka; higher income countries: Japan, Malaysia, Singapore and South Korea. The period is from 1981 to 2012.
- 9.
- 10.
In particular, general wisdom is that multinational firms sustain, through FDI, the international knowledge diffusion.
- 11.
BRICS: Brazil, Russia, India, China, South Africa. N-11 excludes South Korea, because its growth is much higher as compared to other countries in N-11. We have however done empirical analysis including South Korea as well, but results remain more or less the same.
- 12.
The index measures the degree of economic freedom present in five major areas: (1) Size of Government; (2) Legal System and Security of Property Rights; (3) Sound Money; (4) Freedom to Trade internationally and (5) Regulation. It ranges from 0 to 10 (where 0 means no economic freedom and 10 means complete economic freedom).
- 13.
Time series data on literacy rate are not available.
- 14.
Results are not presented here but are available on request.
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Choudhry, M.T., Marelli, E., Signorelli, M. (2020). Global Integration and Economic Growth in Emerging Countries: The Case of BRICS and NEXT-11. In: Paganetto, L. (eds) Capitalism, Global Change and Sustainable Development. Springer Proceedings in Business and Economics. Springer, Cham. https://doi.org/10.1007/978-3-030-46143-0_3
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