Iranian Journal of Economic Research

Economic Integration in Persian Gulf Countries; A Spatial Econometrics Approach

Authors

Nematollah Akbari 1
Mozhgan moallemi 2

1 Assistant Professor, Faculty of Administrative Sciences and Economics, Department of Economics, University of Isfahan, Isfahan, Iran

2 Ph.D. Student , Faculty of Administrative Sciences and Economics, Department of Economics, University of Isfahan, Isfahan, Iran

Abstract
On the theory, integration among countries that have common economic as well as political benefits, such as Persian Gulf Countries, may result in resource reallocation, an increase in products, trade and then economic welfare for members. This paper investigates the effect of trade integration on international trade flows among the members, using the trade gravity model.
  The contiguity effect must be considered because of spatial dependence of the member countries. These countries have some common borders and therefore, spatial dependence among them affects their trade flows. Also, the paper addresses the question of extent the contiguity factor can influence the intra-trade flows of the members.
  The estimation results show that the spatial dependence hypothesis is confirmed in the model. Moreover, the coefficient of integration variable reveals the fact that trade flows among Persian Gulf countries are below potential level. Therefore, these countries should remove trade obstacles to benefit from potential trade as well as comparative advantages.

Keywords

Economic Integration
Gravity Model
Persian Gulf Countries
Spatial Dependence
Spatial Lag and Spatial Heteroscedasticity

  • Receive Date 11 May 2016
  • First Publish Date 11 May 2016

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