Effects of economic integration on lesser developed countries

Abstract

This thesis attempts to develop the use of the trade flow model in the evaluation of economic integration in the third world. We concentrate on three inter-related issues:

(i) What is the role of economic integration in the third world, and is it adequate to base third world integration on the traditional theory.

(ii) Given the theoretical role of integration in the third world, what methods and general approach should the evaluation of these schemes be based on.

(iii) To what extent does the trade flow model isolate the effects of economic integration on trade flows.

We develop the trade flow model as one of the aspects of the evaluation framework, and use it to estimate the effects of integration on trade flows in the Caribbean Community (Caricom), over the period 1967 to 1976. We extend the use of the trade flow model from the aggregated form of the equation to estimates of intra and extra regional trade flows, total imports and exports of the region and to the trade flows of the individual member countries.

Based on these results and the evaluation of Caricom we were able to determine the extent to which the model isolates the effects of economic integration on trade flows.