POLITICAL AND ECONOMIC-FACTORS IN REGIONAL ECONOMIC-INTEGRATION

We examine countries' decisions to join each other in regional integration schemes as the result of economic and political costs and benefits. We use a probit model of this decision to examine the wave of regional integration of the late 1950s and early 1960s. The results of this exercise reveal that quality of political relations, openness, country size, and proximity significantly influence the decision of two countries to integrate. The model predicts the formation of the EC, LAFTA and CACM but not that of the EFTA. Moreover, the model does not predict the formation of any other integration schemes in this period.