Venables, Anthony
Regional Integration Agreements A Force for Convergence or Divergence? / Venables, Anthony [electronic resource] : Venables, Anthony - Washington, D.C., The World Bank, 1999 - 1 online resource (36 p.) - Policy research working papers. World Bank e-Library. .
December 1999 - Developing countries may be better served by north-south than by south-south free trade agreements. Free trade agreements between low-income countries tend to lead to divergence in member country incomes, while agreements between high-income countries tend to lead to convergence. Venables examines how benefits - and costs - of a free trade area are divided among member countries. Outcomes depend on the member countries' comparative advantage, relative to one another and to the rest of the world. Venables finds that free trade agreements between low-income countries tend to lead to divergence in member country incomes, while agreements between high-income countries tend to lead to convergence. Changes induced by comparative advantage may be amplified by the effects of agglomeration. The results suggest that developing countries may be better served by north-south than by south-south free trade agreements, because north-south agreements increase their prospects for convergence with high-income members of the free trade area. In north-south free trade agreements, additional forces are likely to operate. The agreement may be used, for example, as a commitment mechanism to lock in economic reforms (as happened in Mexico with the North American Free Trade Agreement and in Eastern European countries with the European Union). A free trade agreement may also - through its effect on trade and through foreign direct investment - promote technology transfer to lower-income members. This paper - a product of Trade, Development Research Group - is part of a larger effort in the group to study the effects of regional integration. The author may be contacted at avenables@worldbank.org.
10.1596/1813-9450-2260
Agriculture
Comparative Advantage
Consumers
Country Strategy and Performance
Development Economics
Economic Integration
Economic Performance
Economic Theory and Research
Emerging Markets
Finance and Financial Sector Development
Financial Literacy
Free Trade
Human Capital
Income
Income Levels
Inequality
International Economics & Trade
Law and Development
Macroeconomics and Economic Growth
Outcomes
Per Capita Income
Per Capita Incomes
Poverty Reduction
Private Sector Development
Production
Public Sector Development
Real Income
Social Protections and Labor
Theory
Trade and Regional Integration
Trade Diversion
Trade Law
Trade Policy
Value
Value Added
Welfare
Regional Integration Agreements A Force for Convergence or Divergence? / Venables, Anthony [electronic resource] : Venables, Anthony - Washington, D.C., The World Bank, 1999 - 1 online resource (36 p.) - Policy research working papers. World Bank e-Library. .
December 1999 - Developing countries may be better served by north-south than by south-south free trade agreements. Free trade agreements between low-income countries tend to lead to divergence in member country incomes, while agreements between high-income countries tend to lead to convergence. Venables examines how benefits - and costs - of a free trade area are divided among member countries. Outcomes depend on the member countries' comparative advantage, relative to one another and to the rest of the world. Venables finds that free trade agreements between low-income countries tend to lead to divergence in member country incomes, while agreements between high-income countries tend to lead to convergence. Changes induced by comparative advantage may be amplified by the effects of agglomeration. The results suggest that developing countries may be better served by north-south than by south-south free trade agreements, because north-south agreements increase their prospects for convergence with high-income members of the free trade area. In north-south free trade agreements, additional forces are likely to operate. The agreement may be used, for example, as a commitment mechanism to lock in economic reforms (as happened in Mexico with the North American Free Trade Agreement and in Eastern European countries with the European Union). A free trade agreement may also - through its effect on trade and through foreign direct investment - promote technology transfer to lower-income members. This paper - a product of Trade, Development Research Group - is part of a larger effort in the group to study the effects of regional integration. The author may be contacted at avenables@worldbank.org.
10.1596/1813-9450-2260
Agriculture
Comparative Advantage
Consumers
Country Strategy and Performance
Development Economics
Economic Integration
Economic Performance
Economic Theory and Research
Emerging Markets
Finance and Financial Sector Development
Financial Literacy
Free Trade
Human Capital
Income
Income Levels
Inequality
International Economics & Trade
Law and Development
Macroeconomics and Economic Growth
Outcomes
Per Capita Income
Per Capita Incomes
Poverty Reduction
Private Sector Development
Production
Public Sector Development
Real Income
Social Protections and Labor
Theory
Trade and Regional Integration
Trade Diversion
Trade Law
Trade Policy
Value
Value Added
Welfare