Abstract
This paper employs a multidimensional approach to gauge the degree of regional integration and analyze impact on growth, inequality, and poverty. It constructs a multidimensional regional integration index (MDRII) series that embodies six key facets of regional integration: (i) trade and investment, (ii) money and finance, (iii) regional value chains, (iv) infrastructure and connectivity, (v) movement of people, and (vi) institutional and social integration. The MDRII confirms that regional integration is most advanced in the European Union which scores high in all six dimensions; Asia comes second with the largest contribution from infrastructure and connectivity. Empirical analysis suggests significant and positive development impact of regional integration even when trade and financial openness is controlled. The regional value chain, movement of people, and institutional and social integration dimensions have been significant drivers of economic growth. Infrastructure and connectivity improve income distribution. Overall integration alongside the dimensions of trade and investment, money and finance, and institutional and social integration appear to significantly and robustly reduce poverty.
Highlights
Regional integration has been pursued as a useful development strategy to promote economic growth and reduce poverty and income inequality for more than half a century in many parts of the world
We seek to contribute to the literature on the link between regional integration and the attainment of development goals of higher growth, and lower poverty and inequality by employing a composite index as well as six dimensional subindexes that capture the multidimensional nature of regional integration
We employed a multidimensional approach in gauging regional integration and analyzing its impact on attaining development goals of higher growth, lower inequality, and reduced poverty
Summary
Regional integration has been pursued as a useful development strategy to promote economic growth and reduce poverty and income inequality for more than half a century in many parts of the world. DiCaprio, Santos-Paulino, and Soklova (2017) constructed indexes for internal and external exposure to specific regional groupings based on membership in regional trade agreements and found that regional integration leads to lower within-country inequality in member countries Both Beckfield (2006) and Piotrowska (2008) utilized intraregional trade share as a measure for regional economic integration in Europe to investigate the relationship between regional economic integration and inequality. We seek to contribute to the literature on the link between regional integration and the attainment of development goals of higher growth, and lower poverty and inequality by employing a composite index as well as six dimensional subindexes that capture the multidimensional nature of regional integration. This paper constructs a composite index of regional integration that captures its dynamic and multifaceted nature to investigate how various aspects of regional integration, individually and collectively, have evolved and impacted on economic growth, income inequality, and poverty.
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