Regional integration, growth and convergence Analytical techniques and preliminary results

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Regional integration, growth and convergence
Analytical techniques and preliminary results

• Dr Dirk Willem te Velde
• 22 May 2008,
• CARIS Sussex conference on Deep Regional
  Integration

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Key questions

• Does regional integration lead to convergence and
  growth amongst developing countries? And how (ie
  what type of RI)?
• What analytical techniques are useful to address
  these questions (this paper abstracts from CGE
  modeling and theoretical approaches)

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Key messages

• Need for growth analytical techniques to address
  regional integration and growth issues
• Need to measure different types of regional
  integration in order to assess effects
• Preliminary policy messages
• No clear effects of RI on growth in regressions,
  but suggested in country specific country
  regressions
• Incomes in regions with high initial disparities
  converge faster and deep integration might
  address convergence
• Micro level productivity effects of regional
  exporting no less than effects of global
  exporting dynamic vs static effects

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Regional integration and development Issues

• Trade diversion and trade creation
• Narrow and deep integration
• Trade integration and providing regional public
  goods
• Static and dynamic effects
• Micro and macro effects
• Convergence or divergence

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Growth analytical techniques

• Measuring and describing regions
• Growth and convergence models (macro)
• Disparities in incomes (macro)
• Growth diagnostics (macro)
• Firm level (micro)

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Measuring regions

• Narrow trade integration
• Deep trade integration (falling under WTO)
• Functional co-operation and institutional
  development

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Trade and Investment provisions in regions

Source Te Velde (2006) years between
parentheses indicate when certain provisions were
announced.
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Summary characteristics of regions

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Regional functionalco-operation (example)

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Dispersion of incomes

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Macro-economic growth effects

• 100 Developing countries, 1970-2004
• Accounting for other explanatory variables such
  as trade/FDI
• Evidence for conditional convergence.
• Growth experiences differ across regions.
• No clear growth effects of customs unions
• No clear growth effects of trade provisions index
• Should we be surprised? Perhaps not but.

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Growth diagnostics

• CEM Uganda suggest roads, railways, electricity
  amongst binding constraints to growth.
• There have regional aspects
• Uganda-Kenya railways
• Electricity grids
• Road to Mombassa port
• Roads to DRC, Rwanda, and Sudan

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Explaining dispersion of incomes(role for
initial dispersion / DFIs)
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Regional exporting and firm level productivity
dynamic micro effects
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Conclusions Ways Forward

• Need for further development of growth analytical
  projects to assess effects of different types of
  regions
• Needs for better measuring of different aspects
  of regional integration
• Empirical models would benefit from further
  refinement, e.g. use of intra-regional migration
  and regional infrastructure measures
• Policy messages emerging