From David Ricardo to Heckscher-Ohlin-Samuelson, economic theory has been pretty orthodox when it comes to explain international trade. The main assumption relied on the comparative advantage concept. Implicit in this assumption is the relationship between international trade and economic growth: the higher the specialization, the higher the trade benefits, hence the higher economic growth. The economic literature has seen many bridges between international trade and industrial organization with the notion of intra-industry trade for instance, or the bridge between international trade and endogenous economic growth.
Objectives
Our study has two goals: on the one hand, from a theoretical perspective, it aims at creating a link between the patterns of specialization and economic growth in developping economies, also defined as unconditional convergence, and in the other hand, it aims at building an empirical model to test the existence of unconditional convergence in the context of China and India.
Data/Methods
This study is of particular importance in the context of the rise of the so-called "emerging countries." Instead of relying on the creative but not-scientifically based acronym of the BRICS, our approach would help categorize which countries are truly emerging with unconditional convergence vis-à-vis the developped world.
This research is also interesting based on the current literature and in the context of the global financial crisis (Reinhart and Rogoff 2009). From an empirical perspective, we collected a large dataset for China and India constituted of 136 industrial sectors through 6 years, and a set of independent variables. We present a traditionnal model of convergence as in Rodrik (Rodrik 2011) as well as an augmented version of a cross-sectional time series analysis using a GMM estimator.
Our results will allow us to analyze which sectors are of particular interest in terms of investments in each country, and more specifically which sectors truly contribute to unconditional convergence.