Regional Economic Integration and Article Xxiv of the GATT
Posted: 25 Aug 1998
This paper studies the economic impact of regionalism under the realistic assumptions of constant tariffs and asymmetric bloc formation. Extending the Krugman framework, we decompose the impact into several components, each of which has a clear economic implication. Economic integration definitely worsens outsider s welfare even if the external tariffs of the bloc are unraised. Bloc member s welfare first increases with the expansion of the bloc, but when about half of the world is united into the bloc, welfare begins to decrease. Simulation results shed some light on the incentive structure of major participants, who face various configurations of regional integration.
JEL Classification: F15
Suggested Citation: Suggested Citation