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To Wait or Not to Wait: Swiss EU-Membership as an Investment under Uncertainty

Author

Listed:
  • Spirig, Beat

    () (University of Basel)

  • Weder, Rolf

    () (University of Basel)

Abstract

Why do some countries join the EU earlier than others, why do others wait? In order to answer this question we apply the theory of investment under uncertainty (Dixit and Pindyck, 1994) to the decision on EU-membership. We develop a simplified model of two periods to study how the value of waiting depends among other things on the degree of uncertainty. The results give rise to a country’s position to deliberately postpone a membership in order to keep the option to join later if this is desirable. After interpreting the results we apply the findings to the EU. We argue that the approach provides interesting insights regarding EU-membership, in general, and the Swiss position, in particular.

Suggested Citation

  • Spirig, Beat & Weder, Rolf, 2004. "To Wait or Not to Wait: Swiss EU-Membership as an Investment under Uncertainty," Working papers 2004/10, Faculty of Business and Economics - University of Basel.
  • Handle: RePEc:bsl:wpaper:2004/10
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    References listed on IDEAS

    as
    1. Dewatripont, Mathias & Roland, Gerard, 1995. "The Design of Reform Packages under Uncertainty," American Economic Review, American Economic Association, vol. 85(5), pages 1207-1223, December.
    2. Sapir, André, 1997. "Domino Effects in Western European Trade, 1960-92," CEPR Discussion Papers 1576, C.E.P.R. Discussion Papers.
    3. Avinash K. Dixit & Robert S. Pindyck, 1994. "Investment under Uncertainty," Economics Books, Princeton University Press, edition 1, number 5474.
    4. Andreas M. Fischer & Thomas J. Jordan & Caesar P. Lack, 2002. "Giving Up the Swiss Franc:Some Considerations on Seigniorage Flows under EMU," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 138(I), pages 61-82, March.
    5. Perotti, Roberto & Alesina, Alberto, 2004. "The European Union: A Politically Incorrect View," Scholarly Articles 4553004, Harvard University Department of Economics.
    6. Alberto Alesina & Roberto Perotti, 2004. "The European Union: A Politically Incorrect View," Journal of Economic Perspectives, American Economic Association, vol. 18(4), pages 27-48, Fall.
    7. Robert McDonald & Daniel Siegel, 1986. "The Value of Waiting to Invest," The Quarterly Journal of Economics, Oxford University Press, vol. 101(4), pages 707-727.
    8. Sapir, Andre, 2001. "Domino effects in Western European regional trade, 1960-1992," European Journal of Political Economy, Elsevier, vol. 17(2), pages 377-388, June.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    European integration; investment under uncertainty; EU-membership;

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • F02 - International Economics - - General - - - International Economic Order and Integration

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