This paper deals with the effects of European integration in the EC and EFTA on economic growth. Base regressions suggest that EC and EFTA memberships do in fact have a positive and significant effect on economic growth, and that there is no significant difference between EC and EFTA membership. This result is not completely robust with respect to changes in the set of control variables and to measurement errors. Nonetheless, the results suggest that regional integration may not only affect resource allocation, but also long-run growth rates. This conclusion is strengthened by the fact that we obtain similar results when we use panel data for a sample of OECD countries. A number of tests are also conducted to ascertain that the EC/EFTA variable is not primarily a proxy for the effect of economic development. In addition, we explore possible indirect effects of regional integration.JEL Classification: F15, F43.

It has been suggested that members in the EC or the EFTA experienced significantly higher growth rates compared to nonmember countries. This suggests that the European integration either captures omitted variables or that it gives rise to increased growth rates through enhanced investment and/or increased knowledge transfer. The present study attempts to resolve this issue. The analysis identifies a two-link chain between European integration (EI) and growth through investment. In addition, on examining whether there are any knowledge spillovers resulting from integration it is found that integrated countries do in fact experience more knowledge spillovers compared to nonintegrated countries. Employing both the neoclassical and endogenous growth approaches, it is found that trade variables are especially important for growth in Total Factor Productivity (TFP). The study is undertaken for a panel sample consisting of 20 OECD countries and covering three time periods between 1976 and 1990. Special emphasis is placed on specification and sensitivity analysis.

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It has been shown that the more uneven the initial distribution of income, the less an economy is expected to grow. Employing so-called Extreme Bounds Analysis (EBA), it is found that the direct effect of income distribution on growth is fragile. This applies to both democracies and dictatorships. It has also been suggested that income distribution will have different effects when applied to developing as opposed to developed economies. However, the results show that income distribution has the same effect in both developed and developing countries. Nonetheless, this relationship is also fragile.

This paper asks whether net trade in the Middle East and North Africa (MENA) can be explained by differences in comparative costs and in the exploitation of scale economies. Based on a sample of six countries, it is shown that factor proportions do not significantly affect net trade. In an analysis based on a sample of three countries, we are also able to incorporate technical differences and differences in scale economies. We find no support of these variables significantly affecting net trade either. Therefore, we are fairly confident in drawing the conclusion that for our country sample, net trade does not seem to be explained by comparative costs, technical differences, or scale economies. This leads us to conclude that measures undertaken to increase trade between MENA countries without simultaneously removing domestic distortions may not be welfare improving.