Modelling the regional impact of continental economic integration: Lessonsfrom the European Union for NAFTA

The paper sketches the outlines of a 'model' for predicting the impact of c ontinental economic integration (CI) on shifts (within nations) in economic activity and political power. The approach is straightforward, combining a schematic view of regional development patterns in Europe and the classica l postulates of regional science on the effects of distance. Generalizing f rom the European experience, two scenarios are posited. In the first, CI ac centuates national-regional tensions with a weakening of the national core and pressures for greater decentralization and regional fiscal autonomy (an d even secession). In the second, CI reinforces the national core and the d ependence of peripheral regions on transfer payments. Applying the 'model' to North America, the authors find that Canada falls between the two scenar ios, while Mexico is an almost pure case of scenario 1. An econometric form ulation is proposed at the end.