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Regional integration and economic development: A theoretical approach

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  • Dion, David-Pascal

Abstract

We use a model of combined endogenous growth and economic geography to study the impact of regional economic integration on the member and non-member countries of a regional union. Regional integration affects growth through interregional technology diffusion symbolized by knowledge spillovers generated at home and spreading to the partner countries. Spillovers flow from the leader to the follower. Following integration, the lagging country has access to a bigger stock of knowledge that fosters an increase in its rate of growth and extends the diversity of its products. Trade in goods - or in FDI - and flows of ideas are two faces of the same coin. We show that the progressive decrease in transaction costs through the phasing out of barriers to trade together with product imitation can foster growth and convergence in the member countries. However, in order to avoid eventual trade and investment diversions, the non-member should envisage to join the integrated zone.

Suggested Citation

  • Dion, David-Pascal, 2004. "Regional integration and economic development: A theoretical approach," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 20, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    • Handle: RePEc:trf:wpaper:20
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    Cited by:

    1. Dion, David-Pascal, 2004. "Regional integration and economic development: An empirical approach," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 21, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    2. Kossi Ayenagbo, 2023. "Analyse de l'effet empirique de l'intégration économique sur la croissance sectorielle en Afrique Subsaharienne: quelle implication de la gouvernance?," African Development Review, African Development Bank, vol. 35(1), pages 52-64, March.
    3. Irena Benešová & Luboš Smutka & Lenka Rumánková & Adriana Laputková & Zuzana Novotná, 2016. "Regional Cooperation of the Post-Soviet Countries - Can it Be Influenced by the Structure of the Economy?," Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, Mendel University Press, vol. 64(6), pages 1843-1856.
    4. Aidara, Khadidiatou & Fall, Founty A. & Seck, Abdoulaye, 2019. "Is Africa an Economic Space?," Conference papers 333021, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    5. Dr. Caroline Ntara, 2022. "What Does Africa Stand to Gain from the African Continental Free Trade Area?," International Journal of Science and Business, IJSAB International, vol. 16(1), pages 69-90.
    6. Jonathan E. Ogbuabor & Onyinye I. Anthony-Orji & Oliver E. Ogbonna & Anthony Orji, 2019. "Regional integration and growth: New empirical evidence from WAEMU," Progress in Development Studies, , vol. 19(2), pages 123-143, April.

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    More about this item

    Keywords

    regional economic integration; endogenous growth; economic geography;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F15 - International Economics - - Trade - - - Economic Integration
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies

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