Factors Driving World Market Integration: The Case of Jordan's Industries
Keywords:
World Market Integration, Simultaneous Equations Model, International Fragmentation of Production, Intermediate goods, Imported Inputs, Manufactured Exports, Manufactured Value-Added, Research and DevelopmentAbstract
Objectives: The purpose of this study is to examine the factors driving world market integration, using panel data from 20 industries (at the 2-digit ISIC level) over the period 2009-2017.
Methods: The present study suggests a relatively large system of simultaneous equations to avoid simultaneous and specification bias. The model consists of three endogenous variables (industrial production, manufactured exports, and manufactured value-added) and four exogenous variables (workers' compensation, intermediate goods, intermediate services, and spending on improvement and development).
Results: The simultaneous model was estimated for all industries and for each of the previously defined groups. Intermediate goods showed impressive success in most of the estimated equations, confirming the role of imported inputs in driving world market integration in Jordan. Workers' compensation was found to have a significantly positive effect on most of the endogenous variables across all industries, particularly in the high-exporting group. Intermediate services, however, did not show a significant effect in most models, except for the high-exporting group. Meanwhile, spending on improvement and development had a significantly positive effect for the entire sample and the low-exporting group. Finally, the hypothesis of export-led growth received no empirical support at any significance level in all models.
Conclusions: To accelerate world market integration in Jordan, both the private and public sectors are strongly encouraged to play a key role in enhancing research and development, generating new knowledge, new markets, and new products.
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