Regional integration choices and prospect theory: Evidence from Eastern Partnership countries

Why do states select different regional integration projects? Previous literature explains regional integration choices with reference to strategic and economic interests, as well as through the repertoire of abstract ideas and ‘the logic of appropriateness’. The present study employs a prospect-theoretic approach and the concepts of risk, the reference point and loss aversion to account for distinct regional integration choices. It combines semi-structured elite interviews with Time-Series Cross-Section data, based on an original dataset covering six Eastern Partnership countries: Armenia, Azerbaijan, Belarus, Georgia, Moldova, and Ukraine. The study finds that variation in risk propensities of incumbent elites from the Eastern Partnership region may account for distinct choices between the EU and the Russian-led Eurasian Economic Union. Risk propensities and the resulting regional integration choices are primarily conditioned by varying contextual multi-attribute reference points and further reinforced by the psychological effects of loss aversion.