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

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Author Info
Roland Rieder () (IUHEI, The Graduate Institute of International Studies, Geneva)
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.

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Paper provided by Economics Section, The Graduate Institute of International Studies in its series HEI Working Papers with number 11-2006.

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Length: 47
Date of creation: May 2006
Date of revision: Jun 2006
Handle: RePEc:gii:giihei:heiwp11-2006

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Related research
Keywords: Regional trade agreements; Western Europe; gravity equation; panel econometrics; qualitative choice models;

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Find related papers by JEL classification:
C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data
C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models
F15 - International Economics - - Trade - - - Economic Integration

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  2. Melanie Leiner-Killinger & Christophe Madaschi & Melanie Ward-Warmedinger, 2005. "What does European institutional integration tell us about trade integration?," Occasional Paper Series 41, European Central Bank. [Downloadable!]
  3. Greenaway, David & Milner, Chris, 2002. "Regionalism and Gravity," Scottish Journal of Political Economy, Scottish Economic Society, vol. 49(5), pages 574-85, December. [Downloadable!] (restricted)
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  9. I-Hui Cheng & Howard J. Wall, 2005. "Controlling for heterogeneity in gravity models of trade and integration," Review, Federal Reserve Bank of St. Louis, issue Jan, pages 49-63. [Downloadable!]
    Other versions:
  10. Jonathan Eaton & Samuel Kortum, 1997. "Technology and Bilateral Trade," Boston University - Institute for Economic Development 79, Boston University, Institute for Economic Development.
    Other versions:
  11. Bergstrand, Jeffrey H, 1989. "The Generalized Gravity Equation, Monopolistic Competition, and the Factor-Proportions Theory in International Trade," The Review of Economics and Statistics, MIT Press, vol. 71(1), pages 143-53, February. [Downloadable!] (restricted)
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  14. Baier, Scott L. & Bergstrand, Jeffrey H., 2007. "Do free trade agreements actually increase members' international trade?," Journal of International Economics, Elsevier, vol. 71(1), pages 72-95, March. [Downloadable!] (restricted)
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  15. Richard E. Baldwin, 2006. "The euro's trade effect," Working Paper Series 594, European Central Bank. [Downloadable!]
  16. Mansfield, Edward D. & Reinhardt, Eric, 2003. "Multilateral Determinants of Regionalism: The Effects of GATT/WTO on the Formation of Preferential Trading Arrangements," International Organization, Cambridge University Press, vol. 57(04), pages 829-862, November. [Downloadable!]
  17. Egger, Peter, 2000. "A note on the proper econometric specification of the gravity equation," Economics Letters, Elsevier, vol. 66(1), pages 25-31, January. [Downloadable!] (restricted)
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  18. Francesco Paolo Mongelli & Ettore Dorrucci & Itai Agur, 2005. "What does European institutional integration tell us about trade integration?," Occasional Paper Series 40, European Central Bank. [Downloadable!]
  19. Deardorff, A.V., 1995. "Determinants of Bilateral Trade : Does Gravity Work in a Neoclassical World?," Papers 95-05, Michigan - Center for Research on Economic & Social Theory.
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  20. Peter Egger, . "An Econometric View on the Estimation of Gravity Models and the Calculation of Trade Potentials," WIFO Working Papers 141, WIFO. [Downloadable!]
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  21. Philippe Aghion & Pol Antràs & Elhanan Helpman, 2004. "Negotiating Free Trade," NBER Working Papers 10721, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  22. Laszlo Matyas, 1997. "Proper Econometric Specification of the Gravity Model," The World Economy, Blackwell Publishing, vol. 20(3), pages 363-368, 05. [Downloadable!] (restricted)
  23. Anderson, James E, 1979. "A Theoretical Foundation for the Gravity Equation," American Economic Review, American Economic Association, vol. 69(1), pages 106-16, March. [Downloadable!] (restricted)
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