Static and Dynamic Theories of Trade Integration Revisited

Regional trade agreements (RTAs) are considered as one of the major growth stimulant factors in the contemporary world due to their potentiality in generating welfare gains. When assessing welfare effects of RTAs, until recently, the attention of most researchers confined to the static theory, which addresses the resource allocation effect of trade integration (TI). Even though dynamic theory roots back to the same era that static theory was grounded, the importance of attending to the dynamic efficiency of RTAs became popular in the recent past. Findings of this survey indicate that both theories independently provide a significant assessment on the desirability of RTAs. Thus, this study emphasizes the requirement of attending to both static and dynamic theories when assessing the desirability of RTAs.