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Outsiders In Economic Integration: The Case of a Transition Economy

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  • Manzocchi, Stefano
  • Ottaviano, Gianmarco Ireo Paolo

Abstract

We use a spatial model of endogenous growth to investigate the likely impact of discriminatory integration among two advanced insider countries on their own welfare as well as on the welfare of an outsider transition economy. A first point is that, since convergence in per capita income levels depends on relative market access and local market size, piece-wise integration causes insider-outsider divergence. Nonetheless, outsiders can gain in absolute terms if integration fosters the global growth rate. We also show that exclusion from a regional agreement and ongoing transition have unpredictable joint effects on the structural adjustment, which might even exhibit a swinging behaviour. Such swings may imply large adjustment costs, which can be reduced by careful integration design. In this respect, the asymmetric phasing-out of trade barriers built into the Europe Agreements seems to work in the right direction.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2385.

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Date of creation: Feb 2000
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Handle: RePEc:cpr:ceprdp:2385

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Keywords: Economic Geography; Trade And Monetary Integration; Transition Economies;

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  1. Ottaviano, Gianmarco Ireo Paolo & Puga, Diego, 1997. "Agglomeration in the Global Economy: A Survey of the 'New Economic Geography'," CEPR Discussion Papers 1699, C.E.P.R. Discussion Papers.
  2. Castanheira, Micael & Roland, Gerard, 2000. "The Optimal Speed of Transition: A General Equilibrium Analysis," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 41(1), pages 219-39, February.
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  4. Paul Krugman, 1990. "Increasing Returns and Economic Geography," NBER Working Papers 3275, National Bureau of Economic Research, Inc.
  5. Richard Portes & Helene Rey, 1998. "The Emergence of the Euro as an International Currency," NBER Working Papers 6424, National Bureau of Economic Research, Inc.
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  10. Baldwin, R.E. & Forslid, R. & Haaland, J.I., 1995. "Investment Creation and Investment Diversion: Simulation Analysis of the Single Market Programme," Papers 23/95, Norwegian School of Economics and Business Administration-.
  11. Martin, Philippe & Ottaviano, Gianmarco Ireo Paolo, 1996. "Growing Locations: Industry Location in a Model of Endogenous Growth," CEPR Discussion Papers 1523, C.E.P.R. Discussion Papers.
  12. Masahisa Fujita & Paul Krugman & Anthony J. Venables, 2001. "The Spatial Economy: Cities, Regions, and International Trade," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262561476, December.
  13. Baldwin, Richard E. & Venables, Anthony J., 1995. "Regional economic integration," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 31, pages 1597-1644 Elsevier.
  14. Brenton, Paul & Di Mauro, Francesca, 1999. "The Potential Magnitude and Impact of FDI flows to CEECs," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 14, pages 59-74.
  15. Gianmarco I. P. Ottaviano, 1996. "The Location Effects of Isolation," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 132(III), pages 427-440, September.
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Cited by:
  1. Khaled Guesmi & Frédéric Teulon, 2014. "The determinants of regional stock market integration in middle east: A conditional ICAPM approach," Economie Internationale, CEPII research center, issue 137, pages 22-31.
  2. Sébastien Dupuch & Hugues Jennequin & El Mouhoub Mouhoud, 2004. "EU enlargement: what does it change for the European economic geography?," Revue de l'OFCE, Presses de Sciences-Po, vol. 91(5), pages 241-274.
  3. Khaled Guesmi & Duc Khuong Nguyen, 2013. "Regional integration of stock markets in Southeast Europe," Working Papers 2013-022, Department of Research, Ipag Business School.
  4. Mouhoud, El Mouhoub & Jennequin, Hugues & Dupuch, Sébastien, 2004. "EU enlargement : what does it change for the european economic geography," Economics Papers from University Paris Dauphine 123456789/1859, Paris Dauphine University.

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