Impact of Bilateral Trade and Institutional Quality on Income Convergence in Central Asia

Article Sidebar

PDF
DOI: https://doi.org/10.28924/2291-8639-23-2025-330
Published: Dec 12, 2025
Cite as:
Ihtisham ul Haq, Hameed Gul, Muhammad Eid Balbaa, Shavkat Otamurodov, Wahib Ali Elayah, Piratdin Allayarov, Zeinabsadat Golestan, Impact of Bilateral Trade and Institutional Quality on Income Convergence in Central Asia, Int. J. Anal. Appl., 23 (2025), 330.

Main Article Content

Ihtisham ul Haq, Hameed Gul, Muhammad Eid Balbaa, Shavkat Otamurodov, Wahib Ali Elayah, Piratdin Allayarov, Zeinabsadat Golestan

Abstract

This study determines the income convergence and the effect of bilateral trade and institutional quality on income convergence in Central Asia. This panel study covers the period from 2003 to 2023 and labor force and capital are treated as control variables. The income convergence is examined through beta and sigma convergence while panel techniques are applied to analyze the effect of bilateral trade and institutional quality on income convergence. The results of study confirms income convergence in Central Asia. Bilateral trade is found to have positive significant effect on income convergence while institutional quality negatively affect income convergence. Moreover, capital and labor force are positively and negatively affected income convergence, respectively. Policy implications are discussed on basis of this study findings.

Article Details

References

  1. R.M. Solow, A Contribution to the Theory of Economic Growth, Q. J. Econ. 70 (1956), 65-94. https://doi.org/10.2307/1884513.
  2. T.W. Swan, Economic Growth and Capital Accumulation, Econ. Rec. 32 (1956), 334-361. https://doi.org/10.1111/j.1475-4932.1956.tb00434.x.
  3. P.M. Romer, Endogenous Technological Change, J. Polit. Econ. 98 (1990), S71-S102. https://doi.org/10.1086/261725.
  4. Y. Saglam, O. Onkan, Income Convergence and Divergence in European Regions: Insights and Policy Implications, Panoeconomicus (2025). https://doi.org/10.2298/PAN240925004S.
  5. X.X. Sala-i-Martin, Regional Cohesion: Evidence and Theories of Regional Growth and Convergence, Eur. Econ. Rev. 40 (1996), 1325-1352. https://doi.org/10.1016/0014-2921(95)00029-1.
  6. H. Gul, I. ul Haq, D. Khan, P. Allayarov, K. Abbas, Exploring Income Convergence for Central and South Asia, Comp. Econ. Res. Cent. East. Eur. 27 (2024), 89-108. https://www.ceeol.com/search/article-detail?id=1298606.
  7. D. Sanli, R. Arslan, Testing Convergence Hypothesis for EU Countries: A Heterogenous Panel Data Approach, J. Econ. Adm. Sci. 41 (2023), 635-657. https://doi.org/10.1108/jeas-08-2022-0202.
  8. W.J. Baumol, Productivity Growth, Convergence, and Welfare: What the Long-run Data Show, Am. Econ. Rev. 76 (1986), 1072-1085. https://www.jstor.org/stable/1816469.
  9. R.J. Barro, Economic Growth in a Cross Section of Countries, Q. J. Econ. 106 (1991), 407-443. https://doi.org/10.2307/2937943.
  10. A.B. Bernard, S.N. Durlauf, Convergence in International Output, J. Appl. Econ. 10 (1995), 97-108. https://doi.org/10.1002/jae.3950100202.
  11. J.W. Dawson, M.C. Strazicich, Time-Series Tests of Income Convergence with Two Structural Breaks: Evidence from 29 Countries, Appl. Econ. Lett. 17 (2010), 909-912. https://doi.org/10.1080/13504850802584807.
  12. H. Gul, I.U. Haq, D. Khan, Exploring Intra-Group Income Convergence for the Central Asian Countries, IRASD J. Econ. 4 (2022), 448-461. https://doi.org/10.52131/joe.2022.0403.0092.
  13. M.T. Workie, Determinants of Growth and Convergence in Transitive Economies in the 1990s: Empirical Evidence from a Panel Data, Prague Econ. Pap. 14 (2005), 239-251. https://doi.org/10.18267/j.pep.264.
  14. C. Lessmann, A. Seidel, Regional Inequality, Convergence, and Its Determinants – A View from Outer Space, Eur. Econ. Rev. 92 (2017), 110-132. https://doi.org/10.1016/j.euroecorev.2016.11.009.
  15. N.I. Doré, A.A.C. Teixeira, Do Human Capital and Institutional Quality Contribute to Brazil's Long Term Real Convergence/divergence Process? A Markov Regime-Switching Autoregressive Approach, J. Inst. Econ. 20 (2023), e9. https://doi.org/10.1017/s1744137423000358.
  16. E.N.C. Baloyi, Growth Convergence in Africa: The Role of Capital and Institutional Quality, in: 10th International conference on Applied Research in Management, Economics and Accounting, (2025).
  17. K. Harger, A.T. Young, J. Hall, Globalization, Institutions, and Income Convergence, J. Reg. Anal. Policy 47 (2017), 110-125. https://ssrn.com/abstract=2897973.
  18. M. Jan, A. Baloch, H. Yousaf, The Impact of Institutional Quality on Inclusive Growth in Developing Countries, J. Dev. Soc. Sci. 6 (2025), 170-180.
  19. O.T. Ugwunna, O.G. Akamobi, O.D. Maduka, Institutions and Economic Growth in Sub-Saharan Africa: A Panel Analysis, Int. J. Innov. Finance Econ. Res. 13 (2025), 1-11.
  20. M. Lu, K. Staehr, Revisiting Economic Growth and Real Convergence in the Post-Communist Countries, Eurasian Econ. Rev. 15 (2025), 89-123. https://doi.org/10.1007/s40822-024-00308-5.
  21. A.B. Darku, W. Baah-Boateng, I. Mohammed, W.A. Rahaman, Sorting Out the Bilateral Trade and Income Convergence Relationship: Does Income and the Nature of Bilateral Trade Matter?, J. Dev. Areas 57 (2023), 247-262. https://doi.org/10.1353/jda.2023.a907745.
  22. I.M. Jamilu, A. Isah, U. Salihu, Convergence Analysis of Per Capita Income (PCI) in the Sub-Saharan African (SSA), Int. J. Manag. Sci. Bus. Anal. Res. 3 (2024), 218-250.
  23. K.K. Lohani, Trade and Convergence: Empirical Evidence from BRICS Countries, Glob. Bus. Rev. 26 (2021), 500-519. https://doi.org/10.1177/0972150921993057.
  24. S. Ghatak, P. De, Income Convergence Across Asian Economies: An Empirical Exploration, J. Asia-Pacific Bus. 22 (2021), 182-200. https://doi.org/10.1080/10599231.2021.1943808.
  25. Y. Zhang, L. Hainan, F. Feng, X. Wu, Digital Economy, Education, Human Capital and Urban–Rural Income Disparity, Financ. Res. Lett. 71 (2025), 106464. https://doi.org/10.1016/j.frl.2024.106464.
  26. S. Filauro, Z. Parolin, P. Valetto, What Explains Recent Trends in Income Inequality in the European Union?, J. Econ. Inequal. 23 (2025), 483-505. https://doi.org/10.1007/s10888-024-09651-8.
  27. A. Ali, Financial Liberalization, Institutional Quality, and Economic Growth Nexus: Panel Analysis of African Countries, Bull. Bus. Econ. 11 (2022), 27-36. https://doi.org/10.5281/zenodo.7639577.
  28. K. Bhattarai, W. Qin, Convergence in Labor Productivity Across Provinces and Production Sectors in China, J. Econ. Asymmetries 25 (2022), e00247. https://doi.org/10.1016/j.jeca.2022.e00247.
  29. World Bank, World Development Indicators, (2025). https://databank.worldbank.org/source/world-development-indicators.
  30. World Bank, World Governance Indicators, (2025). https://www.worldbank.org/en/publication/worldwide-governance-indicators.
  31. I. Choi, Unit Root Tests for Panel Data, J. Int. Money Financ. 20 (2001), 249-272. https://doi.org/10.1016/s0261-5606(00)00048-6.
  32. A. Levin, C. Lin, C. James Chu, Unit Root Tests in Panel Data: Asymptotic and Finite-Sample Properties, J. Econ. 108 (2002), 1-24. https://doi.org/10.1016/s0304-4076(01)00098-7.
  33. K.S. Im, M. Pesaran, Y. Shin, Testing for Unit Roots in Heterogeneous Panels, J. Econ. 115 (2003), 53-74. https://doi.org/10.1016/s0304-4076(03)00092-7.