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Country Size and the Gains from Trade Bloc Enlargement: an Empirical Assessment for the European Community *
Author(s) -
Badinger Harald,
Breuss Fritz
Publication year - 2006
Publication title -
review of international economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.513
H-Index - 58
eISSN - 1467-9396
pISSN - 0965-7576
DOI - 10.1111/j.1467-9396.2006.00655.x
Subject(s) - economics , political science , economic history , humanities , philosophy
Modern trade theory suggests that size matters in determining the allocation of the gains from enlarging a trade bloc among its members. Casella (1996), as a prominent example, postulates that small members gain relatively more. In this paper we provide a comprehensive assessment for the case of European integration, using aggregate and sectoral trade data over the period 1960-90. The Casella hypothesis of a general small country bonus is rejected; a possible inter- pretation is the coexistence of economic forces favoring large countries (due to group ties and advantages in absolute factor endowments), which partly offset or even dominate the small country bonus.