Membership, enlargement and deepening of regional integration
This thesis contributes in several ways to the theoretical literature that studies regionalism. First, this thesis investigates whether there are incentives for a regional trading bloc to enlarge through further extensions of its membership, or to reject new membership requests. Chapter 2 develops a theoretical model where the incentives for a regional trading bloc to enlarge and for third countries to join are formalised, and the enlargement of the bloc is endogenously determined by the interaction between supply of, and demand for membership. Furthermore, this analytical set-up is used to assess how deeper integration among the members of a regional trading bloc affects the equilibrium size of the bloc. Second, this thesis studies the incentives for a country to enter a regional trade agreement when a multilateral free trade agreement is available, and the implications of the choice of regionalism for the incentives to pursue subsequent multilateral trade liberalisation. Chapter 3 provides a theoretical model that formalises a country's choice between entering a regional trade agreement or a multilateral free trade agreement, depicted as alternative trade policy options. Also this analytical framework is used to assess how a country's choice to enter the regional trade agreement affects its incentives to liberalise trade multilaterally. Third, this thesis studies the trade effects of deeper integration among the members of a regional trading bloc, and the impact of economic dissimilarities on the identified trade effects. Chapter 4 develops a general equilibrium model which formalises the trade effects of the formation of a currency union among the members of a regional trading bloc, and of the subsequent enlargement of the currency union to include an economically dissimilar country. Furthermore, this analytical framework is used to assess how economic dissimilarities between the members of the currency union and the accession country affect the magnitude of the trade effects that would follow the enlargement.