How far has globalization gone? A tale of two regions

How far has globalization gone? A tale of two regions

Series: Working Papers. 2329.

Author: Rodolfo Campos, Samuel Pienknagura and Jacopo Timini .

Topics: International trade | International Economy | Competitiveness | Quantitative methods | International cooperation.

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Abstract

We study the globalization of trade in Latin America and Asia over the past 25 years and quantify its economic impact. Employing structural gravity models, we first estimate a proxy of trade globalization that captures the ease of trading internationally with respect to trading domestically. The results indicate similar trade globalization patterns in the two regions, albeit with a high degree of heterogeneity within them. Trade globalization has been particularly strong in agriculture, mining and manufacturing, but has lagged in services. Within-region heterogeneity is associated with a set of trade policy instruments, including tariffs, non-tariff measures, WTO membership and trade agreements. Next, we quantify the economic implications of the estimated globalization trends. Simulations of a multi-sector trade model point to heterogeneous long-term impacts of globalization on GDP (some countries exhibiting substantial gains and others experiencing large losses), with no single sector playing a predominant role.

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