Maxwell C. McGrath-Horn & Ryan R. Uljua

For the last decade, while annual sea-ice has declined and economic activity has increased, many observers have eagerly described the Arctic as the world’s next “emerging market.” While emotively compelling, this popular claim is founded neither in theory nor quantitative analysis. In this paper, we attempt to more thoroughly answer the question “is the Arctic an emerging market?” After discussing the prominent frameworks and assessing available data we find that by most customary metrics the Arctic is not a traditional emerging market. However, using a new framework put forward by emerging market theorists Khanna and Palepu of Harvard University, which describes an emerging market as a transactional arena characterized by institutional voids which inhibit buyers and sellers from easily coming together, we argue that the Arctic can in many ways be considered an emerging market (Khanna & Palepu, 2010). Ultimately, we propose a new way to think of the ‘Arctic economy’ in the global context: as a nascent transactional arena largely nestled inside of stable, highly developed economies where buyers and sellers nonetheless have difficulty in conducting transactions, particularly in capital markets.

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