Difference Between Country Size And Openness

For this research, I will utilize the theory presented by Spolaore and Wacziarg (2005) that finds that “(i) country size and openness are positively related to higher income per capita in steady-state (and hence higher growth in the transition to the steady-state), and (ii) other things equal, the effect of size is larger for countries with higher barriers to trade (and, hence, lower openness), while the effect of higher barriers and lower openness is bigger for smaller countries.” In essence, market size affects growth and income levels, and depends on both the degree of openness of the economy and country size. This theory examines how endogenous country size is determined by trade liberalization and how trade and country size influences economic growth as well as the relationship between political borders and growth (Liu, 2016).

My hypotheses are the following:
H1: The more FTAs are ratified between ASEAN members and non-ASEAN members, the more increase in trade volume and production within ASEAN.
H2: The more FTAs are ratified between ASEAN members and non-ASEAN members, the more increase in foreign direct investment in ASEAN.
H3: The more …show more content…
To do so, I will utilize the computable general equilibrium (CGE) model for trade policy analysis. This is the best model to analyze trade policies’ structural and productivity effects; it can also analyze micro and macroeconomic variables such as productivity gains, net national savings, overall employment, and implications of trade policies (Petri & Plummer, 2016). CGE model is beneficial in order to analyze the impact of FTAs at a macroeconomic level and industries at a microeconomic level (Ando & Urata, 2006). Moreover, using CGE models is advantageous since they are based on consistent structural equations that describe the economic activity of each nation (Kawai & Wignaraja,