This research investigates the impacts of economic integration on endogenous growth by an application of the AK learning-by-doing model. Assuming that the knowledge that increases the productivity of labor will be created by accumulated capital, we divide economic integration into two different categories: one-way and two-way integration. The results show that two identical countries cannot have any benefits from economic integration. | Hue University Journal of Science ISSN 2588–1205 Vol. 128, No. 5C, 2019, pp. 127–140; DOI: ECONOMIC INTEGRATION AND ENDOGENOUS GROWTH: AN EXPLANATION USING AK MODEL Phan Khoa Cuong, Tran Thi Bich Ngoc*, Bui Thanh Cong University of Economics, Hue University, 99 Ho Dac Di St., Hue, Vietnam Abstract: This research investigates the impacts of economic integration on endogenous growth by an application of the AK learning-by-doing model. Assuming that the knowledge that increases the productivity of labor will be created by accumulated capital, we divide economic integration into two different categories: one-way and two-way integration. The results show that two identical countries cannot have any benefits from economic integration. If two countries are different, the domestic country should only integrate with foreign countries that have a lower cost of capital of wage, or higher learning coefficient (the speed of transferring accumulated capital to knowledge) in the case of one-way integration. The same conclusion is still drawn in the case of two-way integration for two similar countries. Keywords: economic integration, endogenous growth, AK model 1 Introduction International economic integration has been on the top of priorities of Vietnam’s Government through the ‘Doi Moi’ since 1986. As an essential part of the international integration, from the National Congress VI until now, Vietnam has gradually implemented widen integration policies with the economic, investment and trade renovation towards more freedom and transparency. There are several milestones that show the huge progress of Vietnam in this process, for example, Vietnam’s participation in the World Trade Organization (WTO) in 2007, ASEAN economic community (AEC) in 2015 or Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) in 2017. Additionally, over the last decades, the world witnessed an unprecedented wave of globalization efforts that
