The Limits to Integration

Michele Fratianni and Francesco Marchionne ()

No 20, Mo.Fi.R. Working Papers from Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences

Abstract: Distance and national borders are a big hurdle to the expansion of cross-border trade. Further constraints on integration come from heterogeneity in culture and institutions and from the forces of geography, defined as continents and oceans. Of the three sets of factors, the forces of geography are the most potent on integration. Continents act as 'natural' integrators and oceans as common water border. Countries in the same continent trade a quarter more than those located in different continents; and countries sharing the same ocean trade a half more than those that do not have a common water border. A certain degree of substitution exists between the effects on trade of continents and regional trade agreements (RTAs). This substitution is most evident in the presence of political blocs like the Soviet Union. With an active political bloc, the continent loses some of its integration property, leaving more room for the sub-continental RTA to enhance trade. When the political bloc withers away, on the other hand, the continent rises as an integration force relative to the RTA.

Keywords: continental blocs; culture; geography; institutions; integration; regional trade agreements (search for similar items in EconPapers)
JEL-codes: F13 F15 F18 (search for similar items in EconPapers)
Pages: 32
Date: 2009-03
New Economics Papers: this item is included in nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Chapter: The Limits to Integration (2011)
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