Integration, Contagion, and Income Distribution - Regional Science Matters - page 128

Fig. 9.1 Regional integration—a balanced view. Source: Author's construction
exports, has been substituted by increased exports to other Asian countries, as well
as to emerging markets outside Asia (Fig. 9.2 ). 2
Growing and deepening value chains play a major role in intraregional trade.
While the region continues to rely on the global market, the shift reflects a trend of
growing regional integration, a process that began in earnest following the 1997/
1998 Asian financial crisis. Other factors may have played a role, but this trend
certainly helped Asia maintain market expansion—even when world trade fell
sharply in 2009.
Proposition 2 Regional integration can reduce income inequality between countries.
It is important to realize that integration may not generate the same benefits for
all. Whether in trade, finance, or infrastructure, integration benefits some more than
others. And when one measures its effects in the broader sense—beyond the
original purpose of integrating—some countries can even lose. 3 So how the benefits
of regional integration are distributed matters a great deal.
Most studies based on Europe's integration indicate the process coincides with a
substantial decrease in income inequality between countries (Leonardi 1995 ;
2 Asia's export share to other emerging markets outside Asia, particularly exports to the Middle
East, grew fast, followed by Africa and Latin America. As a result, the export share to these
regions increased from 8.4 % in January 2007 to 11.3 % in August 2012.
3 Venables ( 2009 ) argued that the gains from integration are unevenly distributed. Some countries
will lose from integration. In particular, the effects of preferential liberalization in regional
integration will only benefit resource-poor countries, whereas non-preferential liberalization
tends to benefit only resource-rich countries.