Chapter 31 Regional economic integration

This chapter presents details on regional economic integration. It reviews and evaluates some of the voluminous literature, theoretical and applied, on the economic effects of regional integration agreements (RIAs). These effects are organized into three types: allocation effects, accumulation effects, and location effects. The first consists of RIAs' impact on the static allocation of resources, in settings with both perfect and imperfect competition. The second encompasses RIAs' impact on the accumulation of productive factors and covers both medium- and long-run growth effects. The third studies the impact of an RIA on the spatial allocation of resources; this analysis draws on the recent economic geography literature. The chapter also discusses the methods and results of empirical evaluations of RIAs, concentrating on North American free trade area NAFTA and the European community (EC). It also elaborates other issues, including the structure of RIAs and the implications of RIAs for the world trading system.