industrial investment and by reducing the need for labor mobility imposes less social costs. Moreover, increased specialization enhances competitiveness and acts as a catalyst for new innovations, technologies, and growth. These considerations are relevant for policy formulation that aim to minimize social and economic costs in the process of trade liberalization. For the purpose of this paper, we will focus only on the IIT index as an indicator reflecting broadly the degree of competitiveness of Arab countries. One needs to be cautious interpreting the IIT as an
Growth 2. Descriptive Statistics on TFP Gaps 3. Share of Imports from OECD 4. Percent of Countries with an Intraindustry Trade Index Greater Than 0.7 in 1970, by Region 5. Percent of Countries with an Intraindustry Trade Index Greater Than 0.7 in 1990, by Region 6. Estimation Results of Equation 1 for TFP1 7. Estimation Results of Equation 2: Sensitivity to the Cut-off for the IIT Index for Total Sample 8. Estimation Results of Equation 2 for TFP1 9. Estimation Results of Equation 4 for TFP1 10. Nonlinear Estimation Results for TFP1 Appendix I: Data
-term benefits are anticipated, increased competitiveness is expected to spur improvements to efficiency, stimulate foreign investment, generate growth possibilities, and present access to larger markets. Given that Arab countries face liberalization, this paper makes use of the Grubel-Lloyd intra-industry trade (IIT) index as an indicator of the degree of industrial specialization to study Arab countries’ ability to compete in a more open trade setting. The objective thus is to analyze how specialized Arab economies are relative to other countries at present, how well they
sector’s IIT index. The sample used in this paper covers intra- and interindustry trade in 87 countries over the period 1970–93. The tests yield three findings. First, they confirm that developing country trade with industrial countries enhances the technological development of developing countries. Second, in both the linear and nonlinear regression specifications, evidence showed that intraindustry trade had a stronger effect on TFP growth than did interindustry trade. Finally, evidence showed that certain country-specific factors could, if unchanged, keep
manufacturing remained small. The major share of trade between the two countries came from flows of primary products from Indonesia to Japan and from flows of manufactured products from Japan to Indonesia. 2. Structural change in intra-industry trade In this subsection, we consider structural change in intra-industry trade in manufacturing. We utilize the following intra-industry trade (IIT) index for a commodity or industry i, which is developed by Grubel and Lloyd (1971) : 1/ I I T i = 1