Discussion paper

DP2528 Winners and Losers from Regional Integration Agreements

How are the benefits - and costs - of a customs union divided between member
countries? Outcomes depend on the comparative advantage of member countries,
relative to each other and to the rest of the world. Countries with a comparative
advantage between that of their partners and the rest of the world do better than
countries with an 'extreme' comparative advantage. As a consequence, integration
between low income countries tends to lead to divergence of member country
incomes, while agreements between high income countries cause convergence. Results
suggest that developing countries are likely to be better served by 'north-south' than
by 'south-south' free trade agreements.


Venables, A (2000), “DP2528 Winners and Losers from Regional Integration Agreements”, CEPR Press Discussion Paper No. 2528. https://cepr.org/publications/dp2528