A Theory Presented By Spolaore And Wacziarg Essay

1048 Words May 3rd, 2016 5 Pages
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 FTAs are ratified between ASEAN members and non-ASEAN members, there will be a decrease in trade restrictions.

The independent variables are the number of free trade agreements between ASEAN members and non-ASEAN members for H1, H2, and H3. The dependent variables are increase in trade volume and production within ASEAN for H1,…

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