Does infrastructure facilitate trade connectivity? Evidence from the ASEAN

Abstract

This paper explores the impact of infrastructure on trade connectivity among ASEAN and three Asian countries—India, China, and Japan. Our study is mainly motivated by the increased infrastructure investment and trade among these countries in recent years. The main results of trade network analysis include high trade density and interconnectedness among ASEAN, India, China, and Japan. There are specific “trade intensive paths” among the few countries in the group. It highlights the “export hubs” or main “suppliers of intermediate goods” in the region. Further, the paper analyzed the nexus between trade connectivity and infrastructure by applying the panel fixed effects method and Poisson pseudo-maximum likelihood. Moreover, the robustness of the results is tested by estimating two-stage least square. Hard infrastructure, foreign direct investment plays a crucial role in bringing the nexus to trade connectivity. Reducing trade barriers and improving infrastructure quality are essential for deepening regional trade integration.