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Journal of Economic Integration 2008 March;23(1) :161-182.
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
Copyright ©2008 Journal of Economic Integration

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
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