Emerging Economies: Differences and Distances

Abstract

Salient differences between advanced and emerging economies for multinational firms extend well beyond obvious ones such as lower income levels and faster growth. We examine the classification of economies based on levels of development and apply the CAGE (cultural, administrative/institutional, geographic, economic) distance framework to analyze differences and distances between advanced and emerging economies. This analysis covers both internal (unilateral) characteristics of countries and differences/distances that can only be measured bilaterally (across country pairs). A gravity model is employed to consider implications for firms from advanced versus emerging economies.