Why Engaging with More Institutions?: Changes in Economic Power Distribution and Levels of Economic Cooperation

Abstract

for their comments on earlier versions of this article and is also grateful to three anonymous reviewers for their constructive comments.What is the effect of changing economic power on the level of institutional cooperation? The existing literature provides contradictory theories. Some posit that power preponderance, such as the presence of hegemony, is the key to greater cooperation, whereas others such as neofunctionalists contend that power parity is a more favorable condition for deeper integration. Unlike these monotonous and static proposals, this article argues for the presence of a curvilinear and dynamic relationship between changes in power ratios and levels of formal economic integration, showing extensive cooperation at large and small power gap differences but less cooperation at the status quo. In addition, states' concern for the distributive consequences of formal economic integration is considered a key condition in the development of the integration. This power gap difference hypothesis is tested with my original data set of four-tier preferential trade agreements (PTAs) from 1950 to 2005. The analysis employs models for ordered outcomes. The research findings largely support the power gap difference hypothesis and add to our knowledge that the dynamic shift of economic power and distribution gives incentives to states to develop certain levels of formal integration.