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EU Expansion and EU Growth

  • Alan V. Deardorff

    (University of Michigan)

  • Robert M. Stern

    (University of Michigan)

Almost from its inception as the European Economic Community, the European Union has excited the hope if not the expectation that it would generate dynamic gains from trade, including perhaps a permanent increase in the rates of growth of participating countries. This paper examines the empirical evidence relating to this issue and then interprets the economic performance of the EU countries in terms of a simple theoretical model of economic integration with increasing returns to scale. The paper concludes that evidence for increased long-run growth rates of the EU countries is weak, and that what may have happened instead is that countries have benefited asymmetrically from the formation and the later expansion of the EU. Benefits of economic integration appear to accrue - in the form of temporarily higher growth rates leading to higher levels of per capita income - first to large countries and then to some smaller countries that entered the arrangement relatively early.

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File URL: http://fordschool.umich.edu/rsie/workingpapers/Papers476-500/r487.pdf
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Paper provided by Research Seminar in International Economics, University of Michigan in its series Working Papers with number 487.

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Length: 48 Pages
Date of creation: 2002
Date of revision:
Handle: RePEc:mie:wpaper:487
Contact details of provider: Postal: ANN ARBOR MICHIGAN 48109
Web page: http://fordschool.umich.edu/rsie/
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  1. Ben-David, Dan, 1993. "Equalizing Exchange: Trade Liberalization and Income Convergence," The Quarterly Journal of Economics, MIT Press, vol. 108(3), pages 653-79, August.
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  6. repec:att:wimass:9607 is not listed on IDEAS
  7. Jean Pisani-Ferry & Alexander Italianer, 1994. "Whither the Gains from European Economic Integration ?," Revue économique, Presses de Sciences-Po, vol. 0(3), pages 689-702.
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  11. David T. Coe & Reza Moghadam, 1993. "Capital and Trade as Engines of Growth in France: An Application of Johansen's Cointegration Methodology," IMF Staff Papers, Palgrave Macmillan, vol. 40(3), pages 542-566, September.
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  15. Paul M Romer, 1999. "Increasing Returns and Long-Run Growth," Levine's Working Paper Archive 2232, David K. Levine.
  16. Ethier, Wilfred J, 1982. "Decreasing Costs in International Trade and Frank Graham's Argument for Protection," Econometrica, Econometric Society, vol. 50(5), pages 1243-68, September.
  17. Wolfgang Keller, 1997. "Are International R&D Spillovers Trade-Related? Analyzing Spillovers Among Randomly Matched Trade Partners," NBER Working Papers 6065, National Bureau of Economic Research, Inc.
  18. David H. Romer & Jeffrey A. Frankel, 1999. "Does Trade Cause Growth?," American Economic Review, American Economic Association, vol. 89(3), pages 379-399, June.
  19. Levy, Philip I, 1997. "A Political-Economic Analysis of Free-Trade Agreements," American Economic Review, American Economic Association, vol. 87(4), pages 506-19, September.
  20. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
  21. Athanasios Vamvakidis, 1999. "Regional Trade Agreements or Broad Liberalization: Which Path Leads to Faster Growth?," IMF Staff Papers, Palgrave Macmillan, vol. 46(1), pages 3.
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