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How integrated is the world economy?

[journal article]

Bowen, Harry P.; Munandar, Haris; Viaene, Jean-Marie

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Please use the following Persistent Identifier (PID) to cite this document:http://nbn-resolving.de/urn:nbn:de:0168-ssoar-254569

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Abstract This paper develops a methodology to measure the degree of economic integration between nations that are members of an integrated area. We show that a fully integrated economic area (IEA) is characterized by three properties regarding the distribution of member shares of total IEA output and total IEA stocks of physical and human capital. We then show that the expected distribution of member shares within a fully IEA is a harmonic series, with the share distribution depending only on the number of IEA members. This property is then used to develop a composite indicator of the degree of economic integration within an IEA that indicates the distance between the theoretical and actual distribution of shares: the closer is the actual distribution to the expected distribution, the greater the degree of integration. We empirically compute our degree of integration for US states, and alternative regional trading agreements (e.g., EU countries, MERCOSUR, Bangkok Agreement, etc.) and a “world” comprising 64 countries.
Classification Political Economy; Economic Policy
Method empirical
Free Keywords Distribution of production; Economic convergence; Factor mobility; Economic integration; E13; F15; F21; F22; O57
Document language English
Publication Year 2010
Page/Pages p. 389-414
Journal Review of World Economics, 146 (2010) 3
DOI http://dx.doi.org/10.1007/s10290-010-0061-y
Status Postprint; peer reviewed
Licence PEER Licence Agreement (applicable only to documents from PEER project)