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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. 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.
  2. Keller, Wolfgang, 1998. "Are international R&D spillovers trade-related?: Analyzing spillovers among randomly matched trade partners," European Economic Review, Elsevier, vol. 42(8), pages 1469-1481, September.
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  9. 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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  12. David T. Coe & Reza Moghadam, 1993. "Capital and Trade As Engines of Growth in France; An Application of Johansen's Cointegration Methodology," IMF Working Papers 93/11, International Monetary Fund.
  13. Diego Puga & Tony Venables, 1995. "Preferential trading arrangements and industrial location," LSE Research Online Documents on Economics 2151, London School of Economics and Political Science, LSE Library.
  14. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
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  16. Pravin Krishna, 1998. "Regionalism And Multilateralism: A Political Economy Approach," The Quarterly Journal of Economics, MIT Press, vol. 113(1), pages 227-250, February.
  17. 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.
  18. 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.
  19. Vanhoudt, Patrick, 1998. "Did the European Unification Induce Economic Growth? In Search of Scale-Effects and Persistent Changes," SSE/EFI Working Paper Series in Economics and Finance 270, Stockholm School of Economics.
  20. Baldwin, Richard & Seghezza, Elena, 1996. "Growth and European Integration: Towards an Empirical Assessment," CEPR Discussion Papers 1393, C.E.P.R. Discussion Papers.
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