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East-West Integration and the Economic Geography of Europe

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  • Arne Melchior
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    Abstract

    Implementation of the European internal market and East-West integration has been accompanied by dramatic change in the spatial distribution of economic activity, with higher growth west and east of a longitude degree through Germany and Italy. In the east, income growth has been accompanied by increasing regional disparities within countries. We examine theoretically and empirically whether European integration as such can explain these developments. Using a numerical simulation model with 9 countries and 90 regions, theoretical predictions are derived about how various patterns of integration may affect the income distribution. Comparing with reality, we find that a reduction in distance-related trade costs combined with east-west integration is best able to explain the actual changes in Europe's economic geography. This suggests that the implementation of the European internal market or the Euro has "made Europe smaller". In Central Europe, capital regions grow faster and there are few east-west growth differences inside countries. There is no convincing support for the hypothesis that European integration had adverse effects on non-members.

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    Bibliographic Info

    Paper provided by CASE-Center for Social and Economic Research in its series CASE Network Studies and Analyses with number 0379.

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    Length: 57 Pages
    Date of creation: 2009
    Date of revision:
    Handle: RePEc:sec:cnstan:0379

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    Keywords: Income distribution; regional inequality; economic growth and convergence; European integration.;

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    Cited by:
    1. Marius Brülhart, . "The Spatial Effects of Trade Openness: A Survey," Discussion Papers 10/10, University of Nottingham, GEP.

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