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Playing Dominoes in Europe: An Empirical Analysis of the Domino Theory for the EU, 1962-2004

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Abstract

This paper addresses the question whether the domino theory of regionalism is a reasonable explanation for the growth in EU membership over the past forty years. In essence, this theory states that the conclusion of a new regional trade agreement or the deepening of an existing one will induce non-members to join the trade bloc. The empirical analysis proceeds in two stages. First, a gravity analysis shows that the EU was more attractive than EFTA since it triggered a higher degree of trade diversion. In a second step, a discrete choice model is used to assess the importance of variables reflecting domino effects relative to other possible determinants of EU expansion. The findings provide convincing evidence in support of the domino theory.

Suggested Citation

  • Roland Rieder, 2006. "Playing Dominoes in Europe: An Empirical Analysis of the Domino Theory for the EU, 1962-2004," IHEID Working Papers 11-2006, Economics Section, The Graduate Institute of International Studies, revised Jun 2006.
    • Handle: RePEc:gii:giihei:heiwp11-2006
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    Cited by:

    1. Baldwin, Richard, 2008. "Big-Think Regionalism: a Critical Survey," CEPR Discussion Papers 6874, C.E.P.R. Discussion Papers.
    2. Florian Ploeckl, 2010. "The Zollverein and the Formation of a Customs Union," Oxford Economic and Social History Working Papers _084, University of Oxford, Department of Economics.
    3. Baldwin, Richard Edward & Rieder , Roland, 2007. "A Test of Endogenous Trade Bloc Formation Theory on EU Data," East Asian Economic Review, Korea Institute for International Economic Policy, vol. 11(2), pages 77-110, December.
    4. Florian Ploeckl, 2010. "The Zollverein and the Formation of a Customs Union," Oxford University Economic and Social History Series _084, Economics Group, Nuffield College, University of Oxford.
    5. Florian Ploeckl, 2015. "The Zollverein and the Sequence of a Customs Union," School of Economics and Public Policy Working Papers 2015-02, University of Adelaide, School of Economics and Public Policy.

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    More about this item

    Keywords

    Regional trade agreements; Western Europe; gravity equation; panel econometrics; qualitative choice models;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • F15 - International Economics - - Trade - - - Economic Integration

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