Comparing the Speed of Convergence in American Integration Areas

Economic growth theory predicts more success for North-South than for South-South agreements. We compare the speed of convergence of the North-South area NAFTA with that of the South-South area SICA and the one of the MERCOSUR. We apply GSL fixed effects and a random effects regression with the Mundlak device, respectively, both with an AR(1) errors. The results indicate that Southern agreement areas clearly converge faster, whereas the within-convergence is faster for NAFTA. But when looking at the confidence intervals, it is shown that the absolute information value of the area-specific speed of convergence is rather limited.