Economic Integration in East Asia
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Economic Integration in East Asia

Perspectives from Spatial and Neoclassical Economics

Edited by Masahisa Fujita, Satoru Kumagai and Koji Nishikimi

Increasing numbers of free trade and economic partnership agreements have been concluded among many countries in East Asia, and economic integration has progressed rapidly on both a de facto and de jure basis. However, as the authors of this book argue, integration may intensify regional inequalities in East Asia and so this process has attracted much attention of late. Will it actually succeed in achieving greater economic growth or will it in fact cause growing regional disparity?
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Chapter 7: Structure and Determinants of Intra-Regional Trade in East Asia

Satoru Kumagai


Satoru Kumagai INTRODUCTION 7.1 The first East Asian Summit was held in Kuala Lumpur, Malaysia, on 14 December 2005. This summit heralded the advent of the era of de jure regional integration in East Asia. However, de facto economic integration of the region unfolded much earlier, in the latter half of the 1980s. In East Asia, de facto regional integration has been pushed forward primarily by extensive networks of multinational enterprises (MNEs) and so far has been leading de jure regional integration. This chapter has two goals: the first is to provide an overview of the structure of intra-regional trade in East Asia during the last two decades. The second is to analyze the determinants of intra-regional trade in East Asia by industrial sector. Specifically, the determinants of trade are analyzed by estimating a variant of the gravity equation. This equation is well known for its successful use in empirical research related to international trade. Knowing the determinants of trade makes it possible to predict the impact of further progress in regional economic integration. Further, this knowledge may also confirm that spatial economics is relevant and indispensable for understanding intra-regional trade in East Asia. This chapter is structured as follows: an overview of the structure of intra-regional trade in East Asia is provided in Section 7.2. This serves as background information to assist in understanding the following sections. In Section 7.3, a theoretical framework for analyzing the determinants of intra-regional trade is proposed. Section 7.4 includes an explanation...

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