Market Integration

This chapter outlines the main advances in the literature on market integration in the last 5 to 10 years. After a short review of the definition of market integration and of the main statistical tools to measure it, each of the three following section addresses one major issue. Section “The First Wave: Measurement” deals with the measurement of integration, updating and expanding the earlier review of Federico (2012) to integration in non-European countries and to transoceanic integration. Section “The Second Wave: The Causes of Integration” surveys the literature on causes of integration, arguing that changes depended mostly on political decisions about barriers to trade, with a substantial contribution of technical progress in the nineteenth and twentieth century. Finally, Section “The Third Wave: The Effects of Integration” deals with the effects of integration. Most papers quote the benefits from integration in the motivation for the choice of the issue, but there are very few and very partial attempts to measure them. Section “Conclusion: Taking Stock” concludes with a short summary of the main findings, stressing the relevance of recent work to integrate spatial and intertemporal arbitrage.