European economic integration in econometric modelling: Concepts, measures and illustration

Processes of regional economic integration have been shaping the economic relations between countries significantly during the last decades. In addition, an increasing integration of the national economies into the global economy has affected these economic relations, too. In an effort to operationalize these integration processes for the purpose of empirical analyses, this paper reviews and analyses concepts and actual measures of European integration and globalization. In particular, it discusses how to separate the effects of European integration from those of globalization. The paper searches for regional integration and globalization indices that reduce the endogeneity problem, and it discusses collinearity between them, and their workability in an illustrative gravity model.