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Trade, Factor Mobility and the Extent of Economic Integration: Theory and Evidence

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  • Irena Mikolajun
  • Jean-Marie Viaene

Abstract

The Middle East was once seen as a medieval great globalized force. Nowadays it shows one of the lowest intra-regional trade in the world and therefore it is claimed that the region is poorly integrated. Yet, with the steady .ow of workers across national borders of the Middle East is this conjecture correct? To answer this question the paper develops an integration benchmark which consists of the steady state production equilibrium characterized by free trade and perfect factor mobility. We apply metrics to measure the distance between this benchmark and the data and compare three different regions of the world (EU, Latin America and Middle East). We find that, despite large differences in trade patterns, measures of economic integration in 2009 are remarkably close across regions. For example, we calculate that economic integration in the Middle East is just 2.4% below that of the European Union.

Suggested Citation

  • Irena Mikolajun & Jean-Marie Viaene, 2015. "Trade, Factor Mobility and the Extent of Economic Integration: Theory and Evidence," CESifo Working Paper Series 5481, CESifo.
    • Handle: RePEc:ces:ceswps:_5481
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    More about this item

    Keywords

    economic integration; Euclidean distance; factor shares; international migration;
    All these keywords.

    JEL classification:

    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • F15 - International Economics - - Trade - - - Economic Integration
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East
    • O54 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean

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