Singapore, Malaysia, Thailand, India and the Philippines, showing that countries with higher
levels of globalization have higher SSGRs. However, the growth effects of globalization on
SSGRs are smaller than in many studies.
Studies measuring the growth effects of globalization using panel data methods for the least
developed poor countries are scarce and the purpose of this paper is to fill this gap using a
comprehensive measure of globalization. Furthermore, we control for possible endogenity
using the systems GMM method (SGMM) of Arellano and Bover (1995) and Blundell and
Bond (1998), which also minimizes the persistence in the variables. The outline of this paper
is as follows: Section 2 briefly reviews important studies on the growth effects of
globalization. Section 3 presents data description and develops specification for estimation.
Estimates with our specifications are reported in Section 4 and section 5 concludes.
2. Globalization and Economic growth: A Brief Survey
Most economists agree that international trade and globalization are important factors in
building an economic system. Throughout recent history, policy-makers have attempted to
produce efficient trade policies that can boost economic growth. However, there is no
consensus among economists regarding the effect of openness in trade on economic growth.
According to Baldwin (2003), there are several reasons for this disagreement. The first and
most important reason is the differences in the way economists define and treat the question
that is being investigated. Some researchers are concerned about the impact of outward-
oriented policies on economic growth. Others are looking at the causal relationship between
the increase in trade and the increase in growth. Furthermore, the interpretation and
definition of openness differs among authors. Another reason for the disagreement is
reflected by the nature of the data and econometric approaches in the models. A variety of
cross country methods have been used and these range from pure cross section techniques to
time series methods based on unit roots and cointegration.
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