Sequencing in Customs Union Formation: Theory and Application to the Eurasian Economic Union

Gerald Pech (), Aidos Alimbekov () and Eldar Madumarov ()
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Aidos Alimbekov: KIMEP University, Postal: 2-4 Abaya, 050010 Almaty, Kazakhstan
Eldar Madumarov: KIMEP University, Postal: 2-4 Abaya, 050010 Almaty, Kazakhstan

Journal of Economic Integration, 2017, vol. 32, issue 1, 65-89

Abstract: In the model of optimal sequencing in economic integration, an agenda setter chooses between two bargaining protocols that correspond to two different integration paths. With multilateral negotiations, the union is formed immediately, whereas with sequential negotiations, a core union is formed before all other countries in the region integrate. The latter is preferred if formation of a core union has negative externalities on a candidate country. The agenda setter improves her bargaining position, but an efficiency loss from delayed integration is incurred. We demonstrate that the threat of delayed entry will not be carried out if an open-rule protocol is available, i.e., if the agenda setter can propose to form a core union and amend this proposal before it is adopted. Yet, if bargaining is time consuming, this result can be overturned and there may be a delay that incurs a temporary efficiency loss. Our model explains the sequential formation of the Eurasian Customs Union.

Keywords: Regional Integration; Sequencing; Customs Union; Bargaining Cost (search for similar items in EconPapers)
JEL-codes: D78 F15 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (1)

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