Regional Integration Agreements: Impact, Geography and Efficiency

In this paper the gravity equation is used to analyse the impact on trade flows of different types of RIAs. Special emphasis is devoted to the test of the natural bloc hypothesis as well as the comparison of different degrees of integration. The empirical analysis has shown that RIAs have a strong impact in determining trade flows. Particularly, the effects on intra-regional trade are shown to be non-contradictorily positive, while evidence is mixed on the influence on non-member countries. At the same time, geography seems to matter and the location in the same continent emerges as an important issue for intra-regional trade creation, while there is still some confusion on the effects on countries that belong to other continents. Finally, the type of RIA, as expected, contributes to introducing some heterogeneity in the results, but it was not possible to confirm the pattern according to which the higher (lower) the intensity of the agreement the stronger (the weaker) the impact on trade flows.