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Enlargement and the EU Periphery: The Impact of Changing Market Potential

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Author Info

  • Marius BRÜLHART
  • Matthieu CROZET
  • Pamina KOENIG

Abstract

We study the impact of changing relative market access in an enlarged EU on the economies of incumbent Objective 1 regions. First, we track the impact of external opening on internal spatial configurations in a three-region economic geography model. External opening gives rise to potentially offsetting economic forces, but for most parameter configurations it is found to raise the locational attractiveness of the region that is close to the external market. Then, we explore the relation between market access and economic activity empirically, using data for European regions, and we simulate the impact of EU enlargement on Objective 1 regions. Our predicted market-access induced gains in regional GDP and manufacturing employment are up to seven times larger in regions proximate to the new accession countries than in "interior" EU regions. We also find that a future Balkans enlargement could be particularly effective in reducing economic inequalities among the EU periphery, due to the positive impact on relative market access of Greek regions.

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Bibliographic Info

Paper provided by Université de Lausanne, Faculté des HEC, DEEP in its series Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) with number 04.02.

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Length: 26 pages
Date of creation: Feb 2004
Date of revision:
Publication status: Published in The World Economy, vol. 27 (6), June 2004, pp.853-876
Handle: RePEc:lau:crdeep:04.02

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Postal: Université de Lausanne, Faculté des HEC, DEEP, Internef, CH-1015 Lausanne
Phone: ++41 21 692.33.64
Fax: ++41 21 692.33.05
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Web page: http://www.hec.unil.ch/deep/publications/cahiers/series
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Keywords: economic geography; EU enlargement; market potential; objective 1 regions;

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References

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  1. Marius BRÜLHART & Rolf TRAEGER, 2003. "An Account of Geographic Concentration Patterns in Europe," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 03.06, Université de Lausanne, Faculté des HEC, DEEP.
  2. Pfluger, Michael, 2004. "A simple, analytically solvable, Chamberlinian agglomeration model," Regional Science and Urban Economics, Elsevier, vol. 34(5), pages 565-573, September.
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  6. Paul Krugman, 1990. "Increasing Returns and Economic Geography," NBER Working Papers 3275, National Bureau of Economic Research, Inc.
  7. Kohler, Wilhelm, 2004. "Eastern enlargement of the EU: a comprehensive welfare assessment," Journal of Policy Modeling, Elsevier, vol. 26(7), pages 865-888, October.
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  9. Rikard Forslid & Gianmarco I.P. Ottaviano, 2003. "An analytically solvable core-periphery model," Journal of Economic Geography, Oxford University Press, vol. 3(3), pages 229-240, July.
  10. Forslid, R. & Haaland, J.I. & Knarvik, K.H.M. & Maestad, O., 1999. "Integration and Transition: Scenarios for Location of Production and Trade in Europe," Papers 13/99, Norwegian School of Economics and Business Administration-.
  11. Kohler, Wilhelm K., 2004. "Eastern Enlargement of the EU : A Comprehensive Welfare Assessment," HWWA Discussion Papers 260, Hamburg Institute of International Economics (HWWA).
  12. Behrens, Kristian & Gaigné, Carl & Ottaviano, Gianmarco Ireo Paolo & Thisse, Jacques-François, 2003. "Inter-regional and International Trade: Seventy Years After Ohlin," CEPR Discussion Papers 4065, C.E.P.R. Discussion Papers.
  13. Krugman, Paul & Elizondo, Raul Livas, 1996. "Trade policy and the Third World metropolis," Journal of Development Economics, Elsevier, vol. 49(1), pages 137-150, April.
  14. Richard E. Baldwin & Joseph F. Francois & Richard Portes, 1997. "The costs and benefits of eastern enlargement: the impact on the EU and central Europe," Economic Policy, CEPR & CES & MSH, vol. 12(24), pages 125-176, 04.
  15. Matthieu Crozet & Pamina Koenig-Soubeyran, 2002. "Trade Liberalization and the Internal Geography of Countries," Working Papers 2002-37, Centre de Recherche en Economie et Statistique.
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