Integration and Growth in East Asia

Sanghoon Ahn and Jong-Wha Lee
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Sanghoon Ahn: Korea Development Institute

Monetary and Economic Studies, 2007, vol. 25, issue S1, 131-168

Abstract: This paper empirically analyzes the experience of East Asia' s economic growth with data both at aggregate-economy and micro-firm levels, focusing on the role of international integration through trade and direct investment. The analysis within a framework of cross-country panel regression shows that trade openness and foreign direct investment (FDI) inflows have a positive effect on GDP growth -particularly in the 1970s and 1980s- while FDI outflows appear to have a negative effect on GDP growth. Micro-level evidence based on manufacturing data in the Republic of Korea (Korea) confirms the positive effect of trade and investment integration on plant-level productivity growth. It also suggests that the relationship between FDI outflows and productivity growth depends on the characteristics of a recipient economy. We find that FDI to the People's Republic of China tends to reduce productivity growth of firms in Korea, while FDI to the United States or Japan works in favor of productivity growth.

Keywords: Integration; Growth; Trade; Foreign direct investment; East Asia (search for similar items in EconPapers)
JEL-codes: F15 F43 O47 O53 (search for similar items in EconPapers)
Date: 2007
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Citations: View citations in EconPapers (2)

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Working Paper: Integration and Growth in East Asia (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:ime:imemes:v:25:y:2007:i:s1:p:131-168

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