Economic Integration among Developed, Developing and Centrally Planned Economies: A Comparative Analysis

TLDR

The study examines six integration schemes to assess their capacity to boost inter‑member trade. The authors decompose trade‑increasing effects into environmental, policy, and system components. Environmental factors, particularly inter‑member distance, account for the greatest variation in trade creation, rendering CACM and EFTA more effective than EEC, LAFTA, and the Andean Pact; although integration benefits both developed and developing countries, distance limits its impact in Latin America, and the CMEA’s policy‑system mix does not outperform market‑economy unions.

Abstract

We examine six integration schemes and decompose their ability to increase inter-member trade into environmental, policy and system effects. Environmental factors caused the greatest variation in trade creation, with inter-member distance the most important environmental variable. The CACM and EFTA have followed more effective integration policies than the EEC, LAFTA and the Andean Pact. Although integration can thus benefit developed and developing countries alike, for some, such as those in Latin America, inter-member distances severely limit its effectiveness. While the combination of policy and system has kept the CMEA fromrr achieving its full potential for increasing inter-member trade, its effectiveness does not differ from that of unions among market economies.