Can South–South Trade Agreements Reduce Development Deficits?

Abstract

With the rise of India and other Southern engines of growth, the South Asian Association for Regional Cooperation (SAARC) and similar vehicles for South–South regional cooperation have gained in importance. Developing a stochastic frontier gravity model, this article investigates the presence of significant ‘behind the border’ and ‘beyond the border’ constraints and analyzes the potential synergy between trade and development goals in the context of SAARC. In particular, the article demonstrates: (a) a considerable potential for improvement of trade complementarities among SAARC members; (b) a long-run scope for gains from trade; (c) country-specific ‘socio-political–economical–institutional’ rigidities form ‘behind the border’ constraints to trade; (d) that realization of trade potential would eliminate development deficits via growth dividends through trade and investment spillovers, exchange of skills and knowledge; and (e) since tariffs are not an important barrier in this region, emphasis should be placed on higher technology cooperation, and cooperation in areas of education, literacy, gender, institutions ensuring good governance, social capital and infrastructure, to help achieve the SAARC Development Goals (SDGs). The main policy insights are that the removal of ‘behind the border’ barriers and policy coordination would reduce ‘productivity lags’ and close the ‘gap’.

Trade Performance and Potential of North African Countries: An Application of a Stochastic Frontier Gravity Model

“…Our results indicate that there are no differences between countries of origin, all interaction variables being non-significant. The key finding of our trade efficiency estimates, when considering the very scant literature that uses stochastic frontier analysis applied to a gravity model (Bhattacharya and Das, 2014;Ravishankar and Stack, 2014), is that trade efficiency has increased over time and has reached relatively high levels, with the exception of Mauritania and Algeria. The trade efficiency scores estimated as a measure of market integration reveal that Tunisia and Morocco are the two most integrated countries in North Africa.…”

“…Following Ravishankar and Stack (2014) and Bhattacharya and Das (2014), we use a stochastic frontier analysis applied to a gravity model. The underlying hypothesis is that we can define a trade frontier whereby 'inefficient' refers to the degree to which trade falls short of the frontier.…”

“…Anderson and Yotov, 2010;Fally, 2015). Following the literature on production economics (Aigner et al, 1977), a stochastic trade frontier representing the maximum possible level of bilateral trade could be construed using a gravity model (Bhattacharya and Das, 2014;Ravishankar and Stack, 2014). Time-variant country-specific trade efficiency estimates can be obtained.…”

Innovation Challenges in South Asia: Evidence from Bangladesh, Pakistan and India

“…Being a leading global economy, India has a critical impact on the region’s performance as it accounts for 80% of the South Asian GDP. Therefore, it is important to understand the dynamics of innovation in India, which has a clear role in technology appropriation and thus a reduction in poverty in the region (Agnihotri, 2015; Bhattacharya & Das, 2014; Das, 2012; Fu et al, 2011; Khanna & Palepu, 2006; Pradeep et al, 2017; Sampath et al, 2012; Surie, 2013). In addition, there is also an urgent need to explore innovations in other regions like Bangladesh and Pakistan, which could help to identify whether the existing definitions and characteristics of resource-constrained innovations in the literature are region-specific or can be generalized to other emerging markets (Agarwal, 2017).…”

The Impact of Competitiveness on Trade Efficiency: The Asian Experience by Using the Stochastic Frontier Gravity Model

“…Kang and Frattianni (2006), Kalirajan and Singh (2008), Armstrong et al (2008), Drysdale (2009), Salim et al (2011), Khan and Kalirajan (2011), Danquah et al (2013), Koh (2013), Sanya et al (2013), Roberto and Edgardo (2014), Ravishankar and Stack (2014), Bhattacharya and Das (2014), Miankhel et al (2014), Ahsan and Chu (2014), Drysdale and Armstrong (2014), Effendi (2014), Sayavong (2015), Viorica(2015), Waheed and Abbas (2015), Miankhel (2015), Armstrong (2015), Nguyen and Kalirajan (2016), Nasir and Kalirajan (2016), Tamini et al (2016), Kalirajan andLiu (2016), Liaquat et. al.…”