Julia Gray: Life, Death, or Zombies? The Vitality of Regional Economic Organizations
Fri, September 27, 2013 • 12:00 PM • BAT 5.108
Life, Death, or Zombies? The Vitality of Regional Economic Organizations
Since the 1960s, regional economic organizations (REOs) have proliferated, not least in the developing world. Yet many of these agreements are among countries with few factor complementarities and little to trade, and recent research shows that many of them do not live up to their own goals. I propose that most organizations end up in one of three situations. They might die off altogether, though this is infrequent, since politicians are usually reluctant to exit from or disband agreements. A large group of them become "zombies," where they exist in name alone, particularly if they are unable to attract and retain talented staff. A third category includes organizations that are alive and functioning. I demonstrate this proposition using a new measure of the vitality of regional economic organizations. Using conservative estimates, around 52% the organizations in the sample are alive and functioning; around 10% are essentially dead, and nearly 38% are zombies. I propose a novel theory to explain an organization's vitality, hinging on the quality of the bureaucracy. The ability of the secretariats to attract and retain talented staff (as proxied by flight connectivity hardship compensation associated with the secretariat's location) as well as to autonomously enact policy are associated with whether organizations truly stay active, or whether they simply endure or die off. Economic predictors, such as levels of wealth and trade in a set of economies, also play a role.