Untapped regional integration potential: A global frontier analysis

Dominik Naeher and Raghavan Narayanan

The Journal of International Trade & Economic Development, 2020, vol. 29, issue 6, 722-747

Abstract: This paper proposes a novel approach to estimate untapped regional integration potential across geographical subregions of the world. We first construct an empirical production possibility frontier for regional integration outcomes based on two composite indices capturing enabling factors and achieved levels of regional integration outcomes across various domains. We then use non-parametric frontier analysis to rate the performance of subregions in terms of integration relative to their estimated potential. The obtained efficiency scores allow us to quantify and compare the empirical magnitudes of untapped integration potential across individual subregions. Our results suggest that, globally, subregional integration levels are currently at 60 percent of the estimated potential on average. Furthermore, there is large variation in integration outcomes, and subregions with large untapped integration potential are spread across all parts of the world. We also demonstrate how, from a policy perspective, the proposed method can be used for assessing achievements in targeting subregions with certain needs and characteristics, and guiding decisions about types of interventions that future programs aimed at fostering higher integration should prioritize in each subregion.

Date: 2020
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DOI: 10.1080/09638199.2020.1722204

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