An Evidence of Diverging SAARC Economies

Assessment of economic-integration and disparities is essential to gain overall glimpse on regional inequalities. Regional trade and investment agreements are critical for economic integration of the regional economies and political harmony. Their contribution to integration and growth of economies is indispensable as they have been instrumental in reducing trade barriers, improving competitiveness, advancing technological options and attracting foreign direct investment. This study attempts to find income-convergence/ divergence among the SAARC countries in the presence of trade liberalisation, technology accumulation, government effectiveness and foreign direct investment. Using β-convergence, the income-convergence or divergence is examined for the period 1999-2015. Panel estimation techniques used here takes into account regional-heterogeneity. Findings show there is a lack of interregional associations and SAARC as a regional-alliance did not met the expectations in terms of reaping regional benefits. Since the signing of SAPTA and SAFTA the SAARC countries have been on the path of divergence leading us to conclude that SAARC is practically ineffective at this time.