PUBLICATIONS & REPORTS
PUBLICATIONS & REPORTS
From Kitakyushu to the world: AGI, a research institute that studies Asia's economy and society
Hub and Spoke Integration and Income Convergence
| Author | Masaru Umemoto |
|---|---|
| Date of Publication | 2003. 2 |
| No. | 2003-01 |
| Download | 87KB |
Contents Introduction
This paper considers the impact of a hub and spoke preferential trading arrangement (PTA) on real income convergence. The theoretical model developed in this paper explains how the comparative advantage of the hub country relative to each spoke country can be linked to the distribution of the trading benefits. The experiments based on the model suggest that the establishment of a hub and spoke PTA leads to a convergence in real income between the hub and higher income spoke countries, while it causes a divergence between the former and lower income spoke countries. Moreover, it is found that PTAs which include spoke countries with very different income levels from each other maximize scope for trade creation and result in a large benefit to the hub country.