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Multilateral trade liberalization and political disintegration - implications for the evolution of free trade areas and customs unions

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  • Schiff, Maurice

Abstract

The author combines two theories - one about how multilateral trade liberalization affects regional integration, the other about how it affects political disintegration - to explain why the ratio of free trade areas to customs unions has increased over time. Ethier argues (1998, 1999) that multilateral trade liberalization led to the recent wave of regional integration arrangements. Alesina and others (1997), in discussing the number and size of countries, argue that multilateral trade liberalization leads to political disintegration, with an increase in the number of countries. Combining the two arguments, the author hypothesizes that as multilateral trade liberalization proceeds, and the number of regional integration arrangements increases, the ratio of free trade areas to customs unions also increases. The data, which show that ratio increasing in the 1990s, are consistent with the hypothesis.

Suggested Citation

  • Schiff, Maurice, 2000. "Multilateral trade liberalization and political disintegration - implications for the evolution of free trade areas and customs unions," Policy Research Working Paper Series 2350, The World Bank.
    • Handle: RePEc:wbk:wbrwps:2350
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    References listed on IDEAS

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    1. Bolton, Patrick & Roland, Gerard & Spolaore, Enrico, 1996. "Economic theories of the break-up and integration of nations," European Economic Review, Elsevier, vol. 40(3-5), pages 697-705, April.
    2. Patrick Bolton & Gérard Roland, 1997. "The Breakup of Nations: A Political Economy Analysis," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(4), pages 1057-1090.
    3. Schiff, Maurice & Winters, L Alan, 1998. "Regional Integration as Diplomacy," The World Bank Economic Review, World Bank, vol. 12(2), pages 271-295, May.
    4. Buchanan, James M & Faith, Roger L, 1987. "Secession and the Limits of Taxation: Toward a Theory of Internal Exit," American Economic Review, American Economic Association, vol. 77(5), pages 1023-1031, December.
    5. Richard Baldwin, 1993. "A Domino Theory of Regionalism," NBER Working Papers 4465, National Bureau of Economic Research, Inc.
    6. Winters, L. Alan, 1996. "Regionalism versus multilateralism," Policy Research Working Paper Series 1687, The World Bank.
    7. Ethier, Wilfred J, 1998. "The New Regionalism," Economic Journal, Royal Economic Society, vol. 108(449), pages 1149-1161, July.
    8. Enrico Spolaore & Alberto Alesina & Romain Wacziarg, 2000. "Economic Integration and Political Disintegration," American Economic Review, American Economic Association, vol. 90(5), pages 1276-1296, December.
    9. Michalopoulos, Constantine & Tarr, David, 1997. "The economics of customs unions in the Commonwealth of Independent States," Policy Research Working Paper Series 1786, The World Bank.
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    Cited by:

    1. Edward D. Mansfield & Helen V. Milner & Jon C. Pevehouse, 2008. "Democracy, Veto Players and the Depth of Regional Integration," The World Economy, Wiley Blackwell, vol. 31(1), pages 67-96, January.

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