Does Export Diversification Lead to Income Convergence? Evidence From Cross-Country Analysis

2020

JFEP

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Purpose The purpose of this paper is to examine the nexus between financial integration and export diversification. Design/methodology/approach The authors consider 96 economies spanning over the period 1995-2014. To provide broader insights, the authors categorize 96 economies into developed, developing, high and low diversified panels. Both volume and equity-based measures of financial integration are used. The generalized method of moments (GMM) method is used to analyze the link between financial integration and export diversification. Findings The results derived from GMM indicate that financial integration is a vital factor of export diversification. Further, the findings reveal similar conclusions for developed, developing, high and low diversified panels. Research limitations/implications The outcome of this study suggests that promoting the financial integration of markets by lowering the restrictions on capital inflows helps countries to lower the risk and diversify their exports. Originality/value Though there exists enormous literature on export diversification, the nexus between financial integration and export diversification is limited. The present study bridges this research gap.

Section: Discussionmentioning

confidence: 99%

Does financial integration drive export diversification? Evidence from a cross-country analysis

Jangam

2020

JFEP

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“…This is based on the free trade model. As per the international trade literature, the factor price equalization theory implies that if a number of limiting restrictions are met, then free trade in goods/capital should lead to price equalization to a subsequent equalization of factor prices which integrate country financially thereby contribute to the economic growth (Romer, 1990; Ben-David, 1996; Ben-David and Loewy, 1998; Akram and Rath, 2020).…”

Section: Notesmentioning

confidence: 99%

A club convergence analysis of financial integration: cross-country evidence

Singh

Sahoo

2023

SEF

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Purpose The purpose of this study is to examine the club convergence of Financial integration (FI) in the case of 60 countries from 1970 to 2015. FI plays a vital role in economic growth through sharing the risk between countries, cross-border capital association, investment and financial information. It also leads to the efficient allocation of capital and capital accumulation, thereby improving the systematic growth and productivity of the economy. Literature on examining the convergence hypothesis of FI is scarce. Design/methodology/approach This study applies the clustering algorithm to identify club convergence, advanced by the Phillips and Sul test, which enables the identification of multiple steady states or club convergence, unlike beta and sigma convergences. Findings The findings indicate the non-convergence when all 60 countries were taken together. This highlights that the selected countries' have unique transition paths in terms of FI. Hence, the authors implement the clustering algorithm, and the estimation shows that 56 countries are categorised into three different clubs. However, for the rest of four countries, the results are sort of ambiguous, favouring neither convergence nor divergence. Practical implications On the basis of three country clubs, Club 1 presents the model countries such as the Netherlands, Singapore and Switzerland. The Club 2 and Club 3 countries can start making moves towards the model countries by making policy adaptations for trade, finance and business facilitation. Originality/value The existing literature provides a plethora of studies investigating the convergence of stock markets, exchange rates and equity markets, but studies on the convergence of FI, particularly across the countries, are scarce. This study contributes by bridging this gap. The study is unique in its type as it takes into account the multiple steady states or club convergence. This study also contributes in policymaking by suggesting Club 1 countries (the Netherlands, Singapore and Switzerland) as the model ones for the FI.

“…Despite its importance in maintaining symmetric growth, social cohesion and sustainable development, vast disparity in STE public expenditure has been noted across Indian states. Geographical characteristics, population, own revenue generation through limited taxes and non-tax sources have motivated studies on the pattern of public expenditure by different states (Kalirajan and Otsuka, 2012; Akram and Rath, 2020). Distribution of funds from multiple channels such as the Finance Commission and several ministries could be another reason for the lack of evenness across Indian states in terms of STE public expenditure.…”

Section: Introductionmentioning

confidence: 99%

“…Moreover, several state- and federal-level (or regional) policies on public expenditure are unique and only applicable to sub-national or regional levels in a particular country. Hence, it is vital to assess the question at the regional level to identify real problems associated with a particular country and indicators for broader information (Akram and Rath, 2019; Akram and Rath, 2020).…”

Section: Introductionmentioning

confidence: 99%

Convergence analysis of science, technology, and environment expenditure: evidence from Indian states

2022

SEF

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Purpose There is vast disparity in public expenditure on science, technology and environment (STE) across various Indian states. Public expenditure on STE is crucial in maintaining symmetric growth, social cohesion and sustainable development. Literature on this topic is scarce, which prompted the investigation of club convergence of STE public expenditure. In particular, the purpose of this paper to study the club convergence of STE public expenditure in the case of 20 Indian states during the period from 1987–1988 to 2019–2020. Design/methodology/approach This study applies the clustering algorithm to identify club convergence, advanced by the Phillips and Sul test, which enables identification of multiple steady states or club convergence, unlike beta and sigma convergences. Findings The findings of this paper show that all Indian states do not converge towards single steady states. This suggests a disparity in STE public expenditure across Indian states. Moreover, the findings favour three clubs that have their own unique transition paths. The results of this study are supported by the robustness check. Practical implications The findings suggest that the allocation of public expenditure on STE can be made based on club convergence to achieve social cohesion, sustainable development and millennium development goals across states. Originality/value Although several previous studies have investigated the convergence of public expenditure by considering either aggregate public expenditure or health/education expenditure, literature on the convergence hypothesis of STE public expenditure, particularly across Indian states, is scarce. Moreover, this paper is unique, as it examines multiple steady states or club convergence. Finally, this paper contributes to policymaking by suggesting which states should be given a push to achieve social cohesion and sustainable development.