Intra-Industry Trade: The Pakistan Experience

Transcription

1 Shahbaz & Letao, Internatonal Journal of Appled Economcs, 7(1), March 2010, Intra-Industry Trade: The Pakstan Experence Muhammad Shahbaz a, and Nuno Carlos Letão b COMSATS Insttute of Informaton Technology, Lahore, Pakstan a, ESGTS, Polytechnc Insttute of Santarém, Portugal b Abstract The smultaneous exports and mports of a product wthn country or a partcular ndustry called ntra-ndustry trade (IIT) or two-way trade. In the recent years, the government of Pakstan had realzed factors to lberalze the nternatonal trade. The lterature of nternatonal economcs demonstrates that ths condton (trade lberalzaton) nduces the IIT. The case study for Pakstan has been neglgence n the economc lterature. Ths manuscrpt analyses the Pakstan's ntra-ndustry trade (IIT) durng the perod of Ths study uses country-specfc characterstcs as explanatory varables. The results ndcate that IIT s a negatve functon of the dfference n GDP per capta between Pakstan and her trade partners. Statstcally strong evdence s also found that ths trade s nfluence by the smlar demand. We also ntroduce an economc dmenson; ths proxy confrms the postve effects of IIT. Ths result reveals the mportance of scale economes and the varety of dfferentated products. Our results also confrm the hypothess that trade ncreases f the transportaton costs decrease. Keywords: Intra-ndustry, scale economes, dfferentated products, transportaton costs JEL Classfcatons: F12, C20 1. Introducton One of the most mportant n post-world War II, especally trade n manufactured goods, has been the growth of ntra-ndustry trade. These contrasts wth nter-ndustry trade (comparatve advantages), whch nvolve countres exchangng products of dfferent ndustres. When the ntra-ndustry trade was frst observed n the 1960s by Verdoorn (1960), Balassa (1966), the authors realzed the revoluton n economcs, there was specalzaton wthn ndustres and two-way nternatonal trade. These authors became aware that certan developed countres exported and mported n the same product categores. Ths phenomenon occurred n the years followng of European Economc Communty (EEC). Grubel and Lloyd (1975) developed the most popular ndex for measurement of ntra-ndustry trade (IIT).e. the smultaneous export and mport of products n the same product categores. Helpman and Krugman (1985) syntheszed the varous attempts to model IIT. The tests of theoretcal models of ntra-ndustry emerged wth Helpman (1987). Ths author analyzed the OECD countres and tests some hypotheses of the model of Helpman and Krugman (1985). Hs results were accordng to the theory. Hummels and Levnsohn (1995) contnued the work of Helpman (1987). The authors analyzed the results for all OECD countres and then extendng to test non-oecd countres wth panel data. Hummels and Levnsohn (1995) used the estmators OLS, Fxed Effects and Random Effects. The results have questoned at least partally, the fndngs obtaned by Helpman (1987).

2 Shahbaz & Letao, Internatonal Journal of Appled Economcs, 7(1), March 2010, Many emprcal studes of IIT have focused on IIT between developed countres. Trade between developed versus developng countres s usually explaned based on the Heckscher- Ohln theorem. There are some emprcal studes of IIT between developed countres and developng countres (see Tharakan, 1986, Balassa and Bauwens, 1987). The poneerng models n IIT are due to Krugman (1979), Lancaster (1980) and Helpman (1981), Eaton and Kerzkowsk (1984), and Helpman and Krugman (1985). All these models consder that products are dfferentated and emphaszed the mperfect competton n ndustral markets, partcularly the scale economes and ndustral concentraton. Pakstan adopted commercal polcy reforms to promote regonal trade. Lke other developng economes Pakstan was also followed mport-substtuton polcy for ndustralzaton that was hghly supported by hgh tarff rates, mport quotas and overvaluaton of exchange rate. Pakstan has joned two regonal-tradng blocks.e. South Asan Assocaton for Regonal Cooperaton (SAARC) and other s the Economc Cooperaton Organzaton (ECO). The ntrandustry trade between ECO and SAARC s very ncpent (Kemal, 2004). Ths paper tests the determnants of ntra-ndustry trade (IIT) between Pakstan and ts man ten trade partners (Unted States, Unted Kngdom, Japan, Germany, Saud-Araba, Canada, France, Italy, Netherlands, and Norway) usng an unbalance panel for the perod ( ). Our study demonstrates that IIT occurs more frequently among countres wth smlar levels of demand. It s stll possble to conclude that the szes of the markets are an mportant determnant. The geographcal dstance and the trade mbalance are accordng to the theoretcal predctons. The same s wth the geographcal dstance and the trade mbalance. 2. Lterature Revew Internatonal trade patterns are tradtonally explaned by the Heckscher-Ohln (HO) model, whch predcts that a partcular country wll exports the products that use ts relatvely abundant factor ntensvely and mports the products that use ts relatvely less abundant factor ntensvely. Accordng to the HO model, smlar countres have lttle reason to trade, partcularly f there are smlar products. The IIT lterature began n 1960s when Balassa (1966) analyzed the trade wthn the ndustres of customs unon n Europe. Grubel and Lloyd (1975) ntroduced a comprehensve ndex to measure IIT. The poneerng works on IIT (Krugman, 1979, 1980, 1981; Lancaster, 1980; Helpman, 1981) exclude the dea that tradtonal theores could explan IIT. The basc structure of horzontal IIT models s that products are not dfferentated by the qualty, but the attrbutes (Krugman, 1979; Lancaster, 1980; Helpman, 1981; Brander and Krugman, 1983; Eaton and Kerzkowsk, 1984). Krugman (1979) consder that consumers have smlar preference (Neo-Chamberlnan models). The model of Krugman (1979) demonstrates that IIT occurs between dentcal economes (geographcal proxmty). The model of Lancaster (1980), called Neo-Hotellng model shows that consumers have a preference map,.e. deal varety. Brander and Krugman (1983) demonstrated that t s possble to explan IIT wth Cournot style. The authors ncorporate transport costs and the recprocal dumpng. Followng Lancaster model, Eaton and Kerzkowsk (1984) explan that IIT s determned by the prces and the dstance between the product spectrums. In vertcal IIT models, the qualty s assumed to be drectly related to the captal-labour rato. A captal-rch country s lkely to produce hgher-qualty products; whle a labour-rch country s lkely to produce lower-qualty products.

3 Shahbaz & Letao, Internatonal Journal of Appled Economcs, 7(1), March 2010, The Neo Heckscher-Ohln model of vertcal IIT (Falvey, 1981, and Falvey and Kerzkowsk, 1985), the captal endowment s assumed to be ndustry-specfc wth at least one sector producng dfferentated products n terms of qualty (vertcal dfferentated product). Accordng to Falvey and Kerzkowsk (1985) the unequal ncome s assumng a source of the demand for varety of vertcally dfferentated products, a larger dfference n ncome wll ncrease the share of vertcal IIT. Shaked and Sutton (1984) explaned the VIIT wth the natural olgopoly. The qualty s assocated on fxed costs. Demand for each qualty of the product depends on the dstrbuton of ncome. Frms face three-part decson process entry, qualty and prce. Havrlsyshyn and Kunzel (1997) analyzed the ntra-ndustry trade of Arabcountres. The authors concluded that Arab regon overall does not have hghly advanced ndustral base, wth an average IIT ndex of 0.25 for the perod The second stage nvolves the sunk cost of research and development. Only a few emprcal studes analyze one ndustry-specfc of ntra-ndustry trade (see for example Clark, 2006, Wakasug, 2007, Letão and Faustno, 2009, and Yoshda, Letão and Faustno, 2009). The studes of Clark, 2006, Wakasug, 2007 and Letão and Faustno, 2009 show the mportance of fragmentaton. The study of Clark (2006) demonstrated that globalsaton wll contnue to renforce the dea that there are more effcent places (.e wth low producton costs) and that s lnked wth vertcal specalzaton. Clark used a Tobt and Probt specfcatons at a country and ndustry level. Wakasug (2007) constructed an ndex of vertcal ntra-ndustry trade to measure the fragmentaton of producton. The author used a gravty model and analysed the mpact of VIIT n East Asa, NAFTA, and European Unon. Wakasug (2007) concluded that fragmentaton ncreased wth ntra-ndustry trade. The study of Letão and Faustno (2009) examnes the determnants of ntra-ndustry trade n the automoble component sector n Portugal. Ths manuscrpt consders Portuguese trade n automoble sector between European Unon (EU-27), the BRIC (Brazl, Inda and Chna), and Unted States between 1995 and The authors usng a panel data (statc and dynamc panel data: GMM-System). Ths study concludes that IIT occurs more frequently among countres that are smlar endowments. Letão and Faustno (2009) also show that trade ncreases f the transportaton costs decrease. Yoshda, Letão and Faustno (2009) consder the vertcal ntra-ndustry trade (VIIT) between Japan and Varous European countres. The authors conclude that IIT between European countres and Japan ncreases wth ther correspondng Japanese FDI (foregn drect nvestment), especally for new EU member countres. Zhang and Clark (2009) nvestgate HIIT and VIIT for the case of Unted States. Ths study uses both ndustry and country specfc characterstcs as explanatory varables. The study of Zhang and Clark (2009) show that HIIT wll have relatvely low factor adjustment costs when compared wth the VIIT. The results have support for new trade theores and tradtonal factor endowment-based (Heckscher - Ohln model). Chang (2009) examnes the man factors of HIIT and VIIT ncludng nvestment approaches of a frm n the ndustry of nformaton technology for Asan, European and US markets. The study uses tme seres data over the perod of for sad varables n sample economes. The results ndcate that vertcal ntra-ndustry trade s playng ts sgnfcant role among Asan and European markets whle horzontal ntrandustry trade s sgnfcant between Asan and US. Letão and Faustno (2008) analyses the determnants of ntra-ndustry trade (IIT) n the Portuguese food processng sector. The study uses both ndustry and country specfc characterstcs as explanatory varables. The results ndcate that IIT n ths sector s a

4 Shahbaz & Letao, Internatonal Journal of Appled Economcs, 7(1), March 2010, postve functon of the dfference n GDP per capta between Portugal and ts European trade partners. Statstcally strong evdence s also found that ths trade s nfluenced by the geographcal dstance between tradng partners. Usng ndustry-specfc characterstcs, the results also show that ths type of trade s negatvely nfluenced by ndustral concentraton. In addton, the foregn drect nvestment nflows have a postve nfluence on Portuguese blateral IIT, although ths varable s not statstcally sgnfcant. 3. Measurement of Intra-Industry Trade The level of IIT s generally measured by the so-called Grubel and Lloyd (1975) ndex. They defned IIT as the dfference between the trade balance of ndustry and the total trade of ths same ndustry. In order to make the comparson easer between ndustres or countres, the ndex s presented as a rato n whch the denomnator s total trade. IIT X M = 1 IIT ( X + M ) ( X + M ) X ( X + M ) M = (1) The ndex s equal to 1 f all trade s of the ntra-ndustry trade type. If IIT s equal to 0, all trade s nter-ndustry trade. 4. Econometrcal Model Followng the lterature our study apples a gravty equaton wth panel data. The dependent varable used s ntra-ndustry trade (IIT). The data for the explanatory varables s sourced from the World Bank, World Development Indcators (2008). The source has used for the dependent varable s Federal Bureau of Statstcs 1 (FBS) Explanatory Varables In accordance wth the theory, we have chosen the followng explanatory varables: -Economc dfferences between countres (DGDP): ths s dfference n GDP (PPP, ncurrent nternatonal dollars) between Pakstan and ts partner country. Loertscher and Wolter (1980) suggest a negatve sgn for the IIT model. Lnder (1961) consders that countres wth smlar demands wll trade smlar products. Hummels and Levnshon (1995) and Greenaway et al. (1994) found a negatve sgn. The study of Turkcan (2005) also found a negatve sgn. Recent study Ferto and Soós (2008), and Letão and Faustno (2009) found a postve sgn. -MnGDP: ths s the lowest value of GDP per capta (PPP, n current nternatonal dollars) between Pakstan and the partner country. Ths varable s ncluded to control for relatve sze effects. Accordng to Helpman (1987) and Hummels and Levnshon (1995), a postve sgn s expected, whch s consstent wth the hypothess of a negatve correlaton between the share of IIT and dssmlarty n per-capta GDP. - MaxGDP: ths s the hgher/hghest value of GDP per capta (PPP, n current nternatonal dollars) between Pakstan and the partner country. Ths varable s also ncluded to control for relatve sze effects. A negatve sgn s expected, as n Helpman (1987), Hummels and Levnshon (1995) and Greenaway et al. (1994). A negatve sgn s consstent wth the hypothess that the more smlar countres are n economc dmenson, the greater the IIT between them.

5 Shahbaz & Letao, Internatonal Journal of Appled Economcs, 7(1), March 2010, DIM: s the average of GDP per capta between Pakstan and the partner country. Usually the studes utlzed ths proxy to evaluate the potental economes of scales and the varety of dfferentated product. Umemoto (2005) found a postve sgn. The study of Letão and Faustno (2009) also found a postve sgn to Portuguese case. -DIST: ths s the geographcal dstance between the Pakstan and the partner country. Balassa (1986) argues that IIT wll be greater when tradng partners are geographcally close. A longer dstance wll ncrease the transacton and transportaton costs. Thus, there s a negatve relatonshp between the share of IIT n the ndustry and geographcal dstance. Hummels and Levnshon (1995) found a negatve sgn. Zhan and Clark (2009) also found a negatve sgn to U.S case. - FDI (Foregn Drect Investment nflows): the relatonshp between IIT and the level of FDI n a partcular ndustry s somewhat ambguous snce FDI may be a substtute for the trade. Gray (1988) consders an ambguous relatonshp between FDI and IIT. Greenaway et al. (1994) estmated a postve sgn for the coeffcent of ths varable. -TIMB (Trade Imbalance): Followng Lee and Lee (1993) our paper consders the trade mbalance as control varable, where TIMB s defned as: TIMB j X j M j = (2) ( X + M ) j j Ths varable represents the net trade as a share of trade and takes a value of zero at the lower extreme f there s no trade mbalance and a value of one f there are nether exports nor mports. Accordng to the theory, a negatve correlaton between ths control varable and IIT s expected Model Specfcaton LogIITt = β + β LogDGDP + β LogMnGDP + β LogMaxGDP + β LogDIST + β LogFDI + β LogTIMB + δt + η + ε t 2 t 3 t 4 t (3) t 6 t 7 t + β LogDIM Where: - IIT s the Pakstan IIT ndex n logs; - DGDP t measures the smlartes between partners as the logarthm of dfference ncome per capta between Pakstan and tradng partner. Log GDP Paks tan GDP partners (4) -MnGDP t (MaxGDP t ) s the mnmum (maxmum) of the logarthm of the GDPs of Pakstan and trade partner n; Paks tan partner - Mn( LogGDP, LogGDP ) Paks tan partner - Max( LogGDP, LogGDP ) (5) These proxes are both control relatve sze effects; - DIM t, s the logarthm of average GDP of two tradng partners; - DIST t s the logarthm between Pakstan and partner ;

6 Shahbaz & Letao, Internatonal Journal of Appled Economcs, 7(1), March 2010, FDI t s the logarthm of Foregn Drect Investment nflows; - TIMB s the logarthm of Trade Imbalance; - η s the unobserved tme nvarant specfc effects; δ t captures a common determnstc trend; ε t s a random dsturbance assumed to be normal, and dentcally dstrbuted (IID) wth E ( ε t ) =0 and Var( ε t )=σ 2 >0. 5. Regresson Model In ths secton we present the results wth country characterstcs as explanatory varable. We nclude n ths estmaton the man trade patterns of Pakstan (Unted States, Unted Kngdom, Japan, Germany, Saud-Araba, Canada, France, Italy, Netherlands, and Norway). In table 1, the determnants of IIT can be observed wth fxed effects model 2. All explanatory varables are sgnfcant at the 1% level (LogDGDP, LogMnGDP, LogMaxGDP, LogDIM, and LogDIST), wth excepton FDI. The dfference between per capta ncomes, n logs (LogDGDP) presents a negatve sgn. Ths result s accordng to lterature (Greenaway et al. (1994), Loertscher and Wolter (1980)). Followng the emprcal model of Helpman and Krugman (1985) and Hummels and Levnsohn (1995), our study also ncludes two varables to control for relatve sze effects. We can see that both are statcally sgnfcant, but only the lower value of GDP (LogMnGDP) has an expected sgn. The postve nfluence of economc dmenson (LogDIM) on IIT s confrmed. Chemsrpong et al. (2005), and Letão and Faustno (2009) show that economc dmenson s postvely related to IIT. The geographcal dstance (LogDIST) presents a negatve correlaton confrmng the results of Bandger and Breuss (2008), Letão and Faustno (2008), and Clark (2006). The relatonshp between IIT and FDI (foregn drect nvestment) s ambguous. As n Gray (1988), we can conclude an ambguous relatonshp between FDI and IIT. Greenaway et al. (1994) found a postve correlaton. The trade mbalance (LogTIMB) presents a negatve relatonshp between ths proxy and IIT, ths result s accordng to the lterature (Lee and Lee 1993). 6. Conclusons The objectve of ths manuscrpt was to analyze some of the determnants of ntra-ndustry trade for that we use a country characterstcs explanatory varables. Econometrcs estmatons support the hypothess formulated. Our results are robust wth Fxed Effects. The varable (LogDGDP) used to evaluate the smlartes between trade partners presents a negatve mpact on IIT, ths result s accordng to the lterature (Loertscher and Wolter, 1980). The proxy used to economc dmenson (DIM) s accordng to the lterature,.e. the market sze beneft and nfluence the IIT. Accordng to the lterature we expected a negatve sgn to geographcal dstance, we fnd ths sgn. The result confrms the mportance of dstance for the gravty model. The trade mbalance (TIMB) represents the net trade as a share of trade. Accordng to the lterature, a negatve sgn between ths control varable and IIT s expected, and the result shows ths. In relaton commercal polcy, we can to refer that South Asa Free Trade Agreement (SAFTA) could be an mportant marc to Pakstan, but ntra-trade n SAFTA s ncpent. Our study shows that the prncpal export markets are Unted States, Saud-Araba, Unted of Kngdom and Germany. However, our study has some lmtatons. We need to ntroduce a dynamc analyss usng Brülhart (1994) margnal IIT ndex. Furthermore, an expanson of

7 Shahbaz & Letao, Internatonal Journal of Appled Economcs, 7(1), March 2010, research would be to dsentangle IIT nto vertcal IIT and Horzontal IIT, because these dfferent types of IIT may have dfferent determnants. The methodology by whch to separate HIIT from VIIT s avalable, havng been poneerng Abel-el- Rahman (1991), and Greenaway et al. (1994). Endnotes 1. FBS s Pakstan s offcal statstcal organzaton. 2. In panel data, pooled OLS, fxed effects (FE) and random-effects (RE) estmators are used n ths type of study. The F statstc tests the null hypothess of the same specfc effect for all countres. If we accept the null hypothess, we could use the OLS estmator. The RE estmator was excluded because our sample s not random. Furthermore, the Hausman test rejects the null hypothess RE versus FE. References Abd-El-Rahman, K Frm s Compettve and Natonal Comparatve Advantages as Jon Determnants of Trade Composton, Revew of World Economcs/Weltwrtschaftlches Archv, (127) 1, Balassa, B Tarff Reductons and Trade n Manufactures among the Industral Countres, Amercan Economc Revew, 56, Balassa, B. and L. Bauwens Intra-Industry Specalzaton n a Mult-Country And Mult-Industry Framework, The Economc Journal, 97, (388), Brander, J. and P. Krugman A Recprocal Dumpng Model of Internatonal Trade, Journal of Internatonal Economcs, 15 (3-4), Brülhart, M Margnal Intra-Industry Trade: Measurement and Relevance for Pattern of Industral Adjustment, Revew of World Economcs, (130), Clark, D. P Country and Industry-Level Determnants of Vertcal Specalzaton Based Trade, Internatonal Economc Journal, (20) 2, Chang, Shun-Chao Horzontal and Vertcal Intra-ndustry Trade and Frm's Investment Strateges: Evdence from the IT Industry n the Asan, EU and US Markets, Global Economc Revew, 38, Chemsrpong, S. Lee and F. J. Agbola Intra-Industry Trade n Manufactures Between Thaland and Other Asa Pacfc Economc Cooperaton (APEC) Countres for 1980, Appled Econometrcs and Internatonal Development, (5) 4, Eaton, J. and H. Kerzkowsk Olgopolstc Competton, Product Varety, and Internatonal Trade, In KIERZKOWSKI, H. (eds.), Monopolstc Competton and Internatonal Trade. New York [etc.] : Oxford Unversty Press.

8 Shahbaz & Letao, Internatonal Journal of Appled Economcs, 7(1), March 2010, Falvey, R. and H. Kerzkowsk Product Qualty, Intra-Industry Trade and Imperfect Competton, n KIERZKOWSKI, H.(eds.), Protecton and Competton n Internatonal Trade. New York [etc.] : Blackwell. Ferto, I. and A. Soós Treatng Trade Statstcs Inaccuraces: The Case of Intra- Industry Trade, Appled Economcs Letters, 1-6. Greenway, D., R. Hne, and C. Mlner Country-Specfc Factors and the Pattern of Horzontal and Vertcal Intra-Industry Trade n UK, Revew of World Economc, (130) 1, Greenway, D., R. Hne, and C. Mlner Vertcal and Horzontal Intra-Industry Trade: A Cross Industry Analyss for the Unted Kngdom, The Economc Journal, (105) 433, Grubel, H. and P. Lloyd Intra-Industry Trade: The Theory and Measurement of Internatonal Trade n Dfferent Products, London: Macmllan. Havrylyshyer, O. and P. Kunzel Intra-Industry Trade of Arab Countres: An Indcator of Potental Compettveness, Internatonal Monetary Found, 18. Helpman, E Internatonal Trade n The Presence of Product Dfferentaton, Economes of Scales and Monopolstc Competton: A Chamberln-Heckscher-Ohln Approach, Journal of Poltcal Economy, 92, Helpman, E. and P. Krugman Market Structure and Foregn Trade: Increasng Returns, Imperfect Competton and the Internatonal Economy, 1 st ed., London: MIT Press. Hummels, D. and J. Levnsohn Monopolstc Competton and Internatonal Trade: Reconsderng the Evdence, Quarterly Journal of Economcs, (110) 3, Kemal, A. R Explorng Pakstan s Regonal Economc Cooperaton Potental, The Pakstan Development Revew, 43 (4), pp: Krugman, P Increasng Returns, Monopolstc Competton and Internatonal Trade, Journal of Internatonal Economcs, (9) 4, Krugman, P Scale Economes, Product Dfferentaton and the Pattern of Trade, Amercan Economc Revew, (70) 5, Krugman, P Intra-Industry Specalzaton and Gans From Trade, Journal of Poltcal Economy, (89) 70, Lancaster, K Intra-Industry Trade under Perfect Monopolstc Competton, Journal of Internatonal Economcs, (10) 2, Lee, H. and Y. Lee Intra-Industry Trade n Manufactures: The Case of Korea, Revew of World Economcs, (129),

9 Shahbaz & Letao, Internatonal Journal of Appled Economcs, 7(1), March 2010, Letão N. C. and H. Faustno Intra-Industry Trade n the Food Processng Sector: The Portuguese Case, Journal of Global Busness and Technology, 4 (1), Letão, N. C. and H. Faustno Intra-Industry Trade n the Automoble Components Industry: An Emprcal Analyss, Journal of Global Busness and Technology, 5(1), Loertscher, R. and F. Wolter Determnants of Intra-Industry Trade among Countres and across Industres, Revew of World Economcs, (116)2, Shaked, A. and J. Sutton Natural Olgopoles and Internatonal Trade, In KIERZKOWSKI, H. (eds.). Monopolstc competton and nternatonal trade. Oxford Unversty Press. Tharakan, P. K. M The Intra-Industry Trade of Benelux wth Developng, World, Revew of World Economcs/ Weltwrtschaftlches Archv, 122, (1), Wakasug, R Vertcal Intra-Industry Trade and Economc Integraton n East Asa, Asan Economc Papers, 6, Yoshda, Y, N. C. Letão, and H. Faustno Vertcal Intra-Industry Trade and Foregn Drect Investment between Japan and European Countres, Atlantc Economc Journal, 37, Verdoorn, R The Intra-Block Trade of Benelux, n E. Robnson (eds.). Economc Consequence of the sze of Natons. London: Macmllan. Zhang, Yanhong and D. P. Clark Pattern and Determnants of Unted States' Intra-Industry Trade, The Internatonal Trade Journal, 23,

10 Shahbaz & Letao, Internatonal Journal of Appled Economcs, 7(1), March 2010, Appendx Table 1: Determnants of Intra-ndustry Trade : Fxed Effects Estmator Varables Coeffcent Expected Sgns LogDGDP (-4.237)*** (-) LogMnGDP (3.068)*** (+) LogMaxGDP (3.981)*** (-) LogDIM (3.790)*** (+) LogDIST (-6.704)*** (-) LogFDI LogTIMB Adj. R Observatons (-1.291) (+/-) (-8.421)*** (-) T-statstcs (heteroskedastcty corrected) are n round brackets. ***- statstcally sgnfcant, respectvely at the 1% levels.