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Piecemeal versus Precipitous Factor Market Integration

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  • Dellas, Harris
  • de Vries, Casper G

Abstract

The effects of the speed of international factor markets integration are studied within a general equilibrium, two country model. It is shown that even in the absence of economic frictions there can be no theoretical presumption regarding the 'optimal' speed of integration. The paper identifies plausible conditions under which a precipitous pace leads to permanently lower and a piecemeal to permanently higher levels of income in the integrated economy. The analysis offers a justification based on long-term economic considerations for piecemeal European Community integration practices such as transition periods, admissions phasing out, and for the precipitous German unification. Copyright 1995 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Suggested Citation

  • Dellas, Harris & de Vries, Casper G, 1995. "Piecemeal versus Precipitous Factor Market Integration," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 36(3), pages 569-582, August.
  • Handle: RePEc:ier:iecrev:v:36:y:1995:i:3:p:569-82
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    Cited by:

    1. Andreas Schäfer & Thomas Steger, 2014. "Journey into the Unknown? Economic Consequences of Factor Market Integration under Increasing Returns to Scale," Review of International Economics, Wiley Blackwell, vol. 22(4), pages 783-807, September.
    2. Viaene, Jean-Marie & Zilcha, Itzhak, 2002. "Capital markets integration, growth and income distribution," European Economic Review, Elsevier, vol. 46(2), pages 301-327, February.
    3. Mountford, Andrew, 1998. "Trade, convergence and overtaking," Journal of International Economics, Elsevier, vol. 46(1), pages 167-182, October.
    4. Jean-Marie Viaene & Itzhak Zilcha, 2000. "Optimal Education with Mobile Capital. An OLG Approach (new title: Optimal Public Education under Capital Mobility)," CESifo Working Paper Series 289, CESifo Group Munich.
    5. Tang, Paul J. G. & Walde, Klaus, 2001. "International competition, growth and welfare," European Economic Review, Elsevier, vol. 45(8), pages 1439-1459, August.
    6. Christou, Costas, 2001. "Differential Borrowing Constraints and Investment in Human Capital," Journal of Macroeconomics, Elsevier, vol. 23(2), pages 277-295, April.
    7. Mountford, Andrew, 1999. "Trade Dynamics and Endogenous Growth: An Overlapping-Generations Analysis," Economica, London School of Economics and Political Science, vol. 66(262), pages 209-224, May.
    8. Viaene, Jean-Marie & Zilcha, Itzhak, 2002. "Public education under capital mobility," Journal of Economic Dynamics and Control, Elsevier, vol. 26(12), pages 2005-2036, October.

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