Convergence Potentials in SAARC and ASEAN Economies

Abstract

This study has set to compare the usefulness of the regional integration efforts taken by two important economic blocs, SAARC and ASEAN, within the Asian continent to reduce the regional income inequality. Therefore, the existence of income convergence (or divergence) among the SAARC and ASEAN countries is the aim of this study. To investigate whether (or not) there exists income convergence across the SAARC and ASEAN blocs over the period of 1970-2017, [Formula: see text]-convergence, σ-convergence and club convergence estimation methods have been applied. The results confirm the convergence of income across the ASEAN member countries, which is absent for the SAARC member countries at the intra-regional level. Although we considered all countries of the SAARC and ASEAN blocs together in the panel, an evidence of income convergence over the years has been found. The analysis supports the view of trade liberalization and recommends investing in the human capital to narrow down the regional disparity in future. To achieve a favorable impact of Asian rising growth, regional integration is important, for that a collective policy framework at the regional level is needed for both SAARC and ASEAN.