ABSTRACT
After 2001, the booming trade between China and Latin American and the Caribbean countries (LAC) has led to concerns about a potential ‘resource curse’ and losses in manufacturing due to rising import competition. Little attention was paid to potential gains to LAC from growing Chinese demand for commodities. I address this issue empirically adopting a difference-in-difference framework and find that China's demand did deliver significantly higher growth rates to LAC exporters over the last decade and a half.
KEYWORDS:
Acknowledgments
The author thanks participants at numerous conferences/seminars, especially Cem Karayalcin and Hakan Yilmazkuday, for their helpful comments and suggestions.
Disclosure statement
No potential conflict of interest was reported by the author.
ORCID
Yulin Hou http://orcid.org/0000-0001-6137-2682
Notes
* This paper is based on the third Chapter of my Ph.D. dissertation.
1 See World Integrated Trade Solution (WITS)
2 See, for instance, Latin American Economic Outlook (2016)
3 For these numbers, see World Integrated Trade Solution (WITS)
4 Brazilian cluster–Argentina, Brazil, Chile, Columbia, Panama, Peru, Uruguay; Mexican cluster–Antigua and Barbuda, Bahamas, Barbados, Belize, Bolivia, Costa Rica, Cuba, Dominica, Dominica Republic, Ecuador, EL Salvador, Grenada, Guatemala, Guyana, Honduras, Jamaica, Mexico, Nicaragua, Paraguay, St.kitts and Nevis, St.Lucia, St.Vincent and the Grenadines, Suriname, Trinidad and Tobago, Venezuela,RB
5 An alternative placebo test uses the different set of countries that did not experience the boom of Chinese-LAC as the treatment group. I collected the data for the South Asia, East Asia and Pacific, Europe and Central Asia and re-estimate the basic specification. The corresponding results show that there is no significant growth acceleration in the new treatment group compared to the control group (Mexican cluster) in 2000s.
6 Primary goods consist of agricultural raw materials, ores, metals and food exports. It comprises SITC section 0 (food and live animals), 1(beverages and tobacco), 2(crude materials except fuels), 4(animal and vegetable oils and fats), 22(oil seeds, oil nuts, and oil kernels), 27(crude fertilizer, minerals nes), 28(metalliferous ores and scrap). Source: World Development Indicator
7 I also consider the 2SLS estimation with several other controls variables, including change in financial development, change in exchange rate stability and change in inflation stability. All of these investigations resulted in virtually the same result: Chinese demand delivers significantly higher growth rates to some countries in LAC over the period 2001–2014. Moreover, I consider the reduced form of estimates including the instruments directly into the second stage (see Table ). The estimated coefficients on the instrument is statistically insignificant. The results strengthen the evidence that instrument do not independently affect growth performance once change of export share to China is accounted.
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Yulin Hou
Yulin Hou‘s research interest is International Trade and Economic Development.