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Feng and Genna argued that homogeneity of domestic institutions is needed to go hand in hand with the regional integration process. Moreover, they pointed out inflation, taxation and government regulation as representing factors for the economic institutions. Another variable that might enhance integration is population as already identified by Tamura. He argued that large population is a catalyst for integration due to economic agglomeration. Scholars like Milner and Kubota even pointed out democracy as an important factor that could foster regionalism. Their empirical work on the developing countries from 1970-1999 showed that regime change toward democracy was associated with trade liberalization, and regionalization.
Given those works, this paper tries to combine the variables into one complete model that can determine the formation of EAR. The paper employs fixed effect model to estimate the variables. The followings are the explanations for the variables used:
i)    the paper use the proxy of trade openness (net export per GDP) for regionalism. The variable of openness is used to represent regionalism since regionalism creates openness to some sectors of economy. Openness here functions as dependent variable that is determined by some independent variables.
ii)    Railways as goods transported (million ton-km) is used to explain physical infrastructure readiness. Pairing up with this variable is the gross school enrolment rate which serves as the basic for human capital infrastructure. Sound infrastructure (both physical and human) will provide steadiness and assuredness in making investment among members. In other words, good infrastructure will only lead to a sustainable intra trade and investment that serve as the basis of EAR.
iii)    To measure democracy, the indices produced by Freedom House that is the index of democracy called POLITY. Democratization is expected to open up new avenues of support for freer trade vis-a-vis regionalism.
iv)    Moving to the next variable is the taxation policy, the higher the rate the more it will diminish the prospects of EAR.
v)    Other variable that also matters is governance which is measured by the six governance indicators estimated by Kaufmann. These indices describe various aspects of the governance structures of a broad cross section of countries, including measures of Voice and Accountability, Political stability, Government Effectiveness, Regulatory Quality, Rule of Law, and Control of Corruption. In general, the Governance index provides explanatory power to explain the capability and quality of governance from each member country. The better indicator a country has the more it has the chance to capitalize regionalism.
vi)    Macroeconomic variable which is represented by inflation creates ambiguous expectation. High inflation might deter the formation of EAR since the very beginning but some scholars prove the other way around. One of argument that supporting the latter proposition is given by Cohen who argued that the inflationary policy (high inflation) resulting from the government action will tend to raise the obstacle to private investors which in turn demand for greater integration. The loss of discretion in the fiscal and monetary policy will then reduced the risk of uncertainty.
vii)    Large market together with the ongoing industrialization process sums up the last aspects of EAR formation. The sheer size of the East Asian population creates not only the potential demand for the goods traded in the region but also the supply of labor force and the low absolute level of wages. In other words, Lewis’s unlimited supply of labor will persist longer in East Asia. The process will lead to an upward trend towards industrialization (value added as percentage from GDP) in the region. The trend is very important since homogeneity in industrialization among countries in the region will smooth the progress of EAR.