The Contribution of Intra-Regional and Extra-Regional Trade to Growth: Evidence from the European Union

Wooster, Rossitza B.; Banda, Tepa M.; Dube, Smile

doi:2008.23.1.161

Journal of Economic Integration 2008 March;23(1) :161-182.
DOI: https://doi.org/10.11130/jei.2008.23.1.161

The Contribution of Intra-Regional and Extra-Regional Trade to Growth: Evidence from the European Union

Rossitza B. Wooster, Tepa M. Banda, Smile Dube

Portland State University
Economic and Planning Systems
California State University, Sacramento

ABSTRACT

In this paper, we assess whether trade among member countries of a regional trade agreement (intra-regional trade) contributes more to output growth than trade with nonmember countries (extra-regional trade). We use Granger causality tests to evaluate the trade-growth relationship in 13 countries from the European Union and separately estimate the differential impact of the two kinds of trade on economic growth over the period 1980-2003. In addition to the basic influences of investment and population growth, we find that intra-regional trade has had a lesser impact on growth in output per capita than extra-regional trade by almost 30%.

JEL classification: F13, F43, C33

Keywords: Regional Integration | Trade Patterns | Economic Growth of Open Economies

REFERENCE

1.	Ades, Alberto F. and Edward L. Glaeser (1999), "Evidence on Growth, Increasing Returns and the Extent of the Market," Quarterly Journal of Economics, Vol. 114(3): 1025-1045.

2.	Alcalá, Francisco and Antonio Ciccone (2003), "Trade, Extent of the Market, and Economic Growth 1960 - 1996," Journal of Economic Literature

3.	Antonelli, Cristiano, Marchionatti, Roberto and Usai, Stefano (2003) "Productivity and External Knowledge: The Italian Case," International Review of Economics and Business, vol. 50(1): 69-90