The Path of European Institutional and Economic Integration: What Lessons for Latin America?

Abstract

What lessons can be drawn from the European experience with regional integration that started in the 1950s, for regional integration in Latin America, which is still in its early stages? We present here a new indicator of institutional integration and study how it developed vis-à-vis diverse measures of economic integration. We find that Latin America is currently less economically integrated not only than the European Union today, but in some cases even than the EU at the beginning of its regional integration process. A cluster analysis illustrates that the link between institutional and economic integration has worked both ways throughout the European experience. The more institutional integration went beyond the creation of a customs union and moved towards a common market and an economic and monetary union, the deeper economic integration turned out. Increasing economic integration in turn corroborated and sustained the process of