THE EFFECTS OF REGIONAL ECONOMIC INTEGRATION IN EUROPE OF THE PATTERN NORTH-NORTH AND NORTH-SOUTH

Abstract

This paper examines the effects of regional economic integration in Europe , especially the North-North and North-South integration patterns, and how the benefits and costs of integration are divided between countries. Outcomes depend on: comparative advantages, factor endowments, factor intensities, competitive advantages, FDI flows, transfers of technology, knowledge spillovers, economies of scale, transport costs, industry/GDP ratios, and agglomeration forces. The North-North integration between high income countries tends to lead to convergence of country incomes. Contrary, the South-South integration between low income countries causes divergence. Low income countries are likely to be better served by the North-South integration.