The Contribution of Trade conditional on Human Capital, Financial Development and Institution to Economic Development. Evidence from ASEAN Nation

Master's Thesis from the year 2013 in the subject Business economics - Economic Policy, grade: 1,3, , language: English, abstract: This thesis addresses the relationship between economic development and trade openness as well as some structural factors (i.e., human capital, financial resources and institution) in the ASEAN countries. This thesis has three objectives. First, it attempts to qualitatively describe the ASEAN cooperation in order to promote interest in ASEAN. Second, it quantitatively estimates the effect of international trade on economic development of the ASEAN nations. Finally, it investigates how the effect of international trade on economic growth varies as a result of differences in human capital, financial resources and institution across the ASEAN nations. To accomplish these tasks, panel dataset on the ASEAN nations from 1980 to 2010 are collected and pooled OLS, fixed-effect and instrumental variable models are applied to the dataset. Taking into account a variety of specification issues as well as endogeneity of trade openness, the research results show that trade openness plays an extremely important role on economic development of these countries. In addition, the benefit from trade openness is greater in countries that have more educated workers, deeper financial resources and better quality of institution. In conclusion, this thesis suggests that these structural factors need to be strengthened in order to benefit more from international trade. Key words: International trade; human capital; financial development; institution; ASEAN; fixed effect; instrumental variable; policy reforms