ABSTRACT
As a salient feature of today’s globalized economy, the rising number of trade agreements has spurred a renewed interest for the theory and practice of economic integration, drawing its rationale mainly from the standard (neoclassical) paradigm. In this context, regional integration schemes are regarded as exemplifying cases where free trade can generate faster economic growth and welfare gains. Furthermore, it is argued that more integrated markets will attenuate income disparities: initially poorer countries are presumed to ‘catch up’ (i.e. converge) with the wealthier ones (e.g. Ben-David and Kimhi, 2004). Hence, opening up to trade, and mostly export promotion, is the better option to attain higher growth, especially for developing countries widely embarked in outward-oriented strategies since the mid-1980s (Edwards, 1993). As a result, the topic has been extensively documented but, although being mostly anchored in the standard approach, it is still subject to an intense debate, which so far has been inconclusive. In the case of the Latin American region, the benefits of trade integration do not seem to have fulfilled the initial expectations and tend to lead to pervasive differences in per capita income and growth rates across countries. However, when addressing this issue, the neoclassical approach still confines itself to the study of supply-side conditions, despite a ‘new’ research agenda. 1 Accordingly, exports will encourage productive input increases and efficiency improvements as relaxing the supply-side constraint on growth.
