1945

Experience with regional integration in Africa: Challenges and opportunities

Two major theoretical motivations for the formation of trade blocs are the allocation effect and the accumulation (or growth) effect of free trade within a regional bloc (Baldwin, 1997). With respect to the allocation effect, economic theory shows that, in a competitive economy, the demand for a good directs productive resources to the production of that good. Hence, demand is an important signal between consumers and producers. Given that the imposition of tariff and non-tariff barriers between countries interferes with this signal, the removal of such trade barriers in the context of regional integration is thought to increase efficiency in resource allocation.

Related Subject(s): Economic and Social Development
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