The Economics of Transnational Regions: Meaning and Measure

Abstract

People often divide the world into “regions,” to facilitate analysis and organize information. The degree to which nations within areas perceived to be regions interact economically has important implications for economic policy and diplomacy. In this paper, the author analyzes and defines transnational regions in economic terms and proposes a measure of regional integration based on trade, which he calls the “regional trade ratio.” He calculates this ratio for four country groups generally considered to be world regions. He finds significant integration for all four—North America, Latin America, Africa, and the Middle East—and high levels of integration for the latter three.

ACKNOWLEDGMENTS

The author is grateful for support for this study from the National Defense University and the Institut d'Etudes Politique de Paris. The author also acknowledges helpful suggestions on an earlier draft by an anonymous referee. The views expressed in this paper are those of the author and do not necessarily reflect the opinion of the National Defense University or the Institut d'Etudes Politique or any official policy.

Notes

¹ Chamberlin (1950) provides an excellent discussion of the difficulty of delineating specific markets.

²For some history of monetary integration and analysis of the effects, see Frankel and Rose (2002) and Gale and Vives (2002).

³For a discussion of “collective action,” see Olson (1971).