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Does infrastructure facilitate trade connectivity? Evidence from the ASEAN
C T Vidya1, Farhad Taghizadeh-Hesary2
1Centre for Economic and Social Studies (CESS), Hyderabad, India.
Asia Europe Journal
|June 21, 2021
Summary
Improved infrastructure and foreign direct investment significantly boost trade connectivity in Asia. Reducing trade barriers and enhancing infrastructure quality are key for deeper regional economic integration among ASEAN, India, China, and Japan.
Area of Science:
- Economics
- International Trade
- Regional Integration
Background:
- Recent years have seen increased infrastructure investment and trade among ASEAN, India, China, and Japan.
- Understanding the drivers of trade connectivity is crucial for regional economic development.
Purpose of the Study:
- To explore the impact of infrastructure on trade connectivity within the ASEAN+3 region (ASEAN, India, China, Japan).
- To identify key factors influencing trade intensity and integration.
Main Methods:
- Trade network analysis to map trade flows and identify intensive paths.
- Panel fixed effects and Poisson pseudo-maximum likelihood methods to analyze the infrastructure-trade nexus.
- Two-stage least squares for robustness checks.
Main Results:
- High trade density and interconnectedness observed among ASEAN, India, China, and Japan.
- Identification of specific "trade intensive paths" and regional "export hubs" or suppliers of intermediate goods.
- Hard infrastructure and foreign direct investment are critical determinants of trade connectivity.
Conclusions:
- Infrastructure development and foreign direct investment are vital for enhancing trade connectivity.
- Reducing trade barriers and improving infrastructure quality are essential for deepening regional trade integration.
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