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Regional Integration and Trade Diversion in Europe
Stockholm School of Economics.
Central Bank of Luxembourg.
Stockholm School of Economics.ORCID iD: 0000-0001-9542-9106
2007 (English)In: Integration and Trade, ISSN 1995-9532, no 26, 205-246 p.Article in journal (Other academic) Published
Abstract [en]

This paper re-examines the relation between regional integration and trade by using the framework suggested by Yeats [1998] to analyze the effects of European integration. We identify the industries that experienced the largest increases in regional trade orientation during three phases of European integration, and examine the simultaneous changes in revealed comparative advantages. Our main conclusion is that there are signs of trade diversion for the earliest phase of European integration (1962-1973), when intra-regional trade increased in industries with weak comparative advantages, but not for later time periods. The main reason is that regional integration has coincided with reductions in external trade barriers, improving market access also for outsiders. At the same time, integration has promoted economic growth and import demand, which has been beneficial for outside producers. We also argue that the static concept of trade diversion is not well suited for analyzing modern integration, which aims to raise the comparative advantage of regional producers by promoting scale economies and competition. If successful, it will reduce the market shares of outsiders, but it does not constitute trade diversion: more efficient outsiders are not replaced by less efficient insiders.

Place, publisher, year, edition, pages
Inter-American Development Bank , 2007. no 26, 205-246 p.
Keyword [en]
European integration; trade creation and diversion
National Category
Economics
Research subject
Politics, Economy and the Organization of Society
Identifiers
URN: urn:nbn:se:sh:diva-27340OAI: oai:DiVA.org:sh-27340DiVA: diva2:809975
Available from: 2015-05-05 Created: 2015-05-05 Last updated: 2017-05-31Bibliographically approved

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http://www10.iadb.org/intal/intalcdi/integracion_comercio/i_INTAL_I&T_26_2007_Kokko_Matha_Tingvall.pdf

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Gustavsson Tingvall, Patrik
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CiteExportLink to record
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Cite
Citation style
  • apa
  • harvard1
  • ieee
  • modern-language-association-8th-edition
  • vancouver
  • Other style
More styles
Language
  • de-DE
  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
  • sv-SE
  • Other locale
More languages
Output format
  • html
  • text
  • asciidoc
  • rtf