International integration and growth: A further investigation on developing countries

The paper examines empirically the linkages between international integration and economic growth in a panel of 47 developing countries and 18 trade blocs over the period 1970-1989. Specifically, it attempts to identify through which channel(s) - notably, specialization according to comparative advantage and increased efficiency, exploitation of increasing returns from larger market, and technology spillovers through investment and trade-trade blocs can affect the economic growth of their member countries. The results suggest that (1) intra-bloc trade does not affect growth significantly; (2) income diversion among member countries contributes positively and significantly to growth; and (3) the size of the trade bloc does matter in the sense that the bigger is not always the better for the welfare of the member countries. © International Atlantic Economic Society 2006.