ABSTRACT
This chapter develops an appropriate theoretical framework for studying the development implications of economic integration, and suggests a conceptual approach for economic integration in a typical developing setting. The term economic integration denotes either a process or a state of affairs. As a process, economic integration involves essentially the gradual removal of discriminatory barriers between two or more national economies (or alternatively between units of the same economy) with the purpose of optimising economic performance. A higher level of economic integration is the customs union, which involves, aside from the elimination of tariffs among member-countries, the unification of tariffs against the outside world. Since the process of economic development aims at increasing the productivity of the factors of production currently employed and at bringing into productive use the idle factor(s) of production, it necessarily entails some fundamental restructuring in the economy.
