IDEAS home Printed from https://ideas.repec.org/p/msb/wpaper/2008-01.html
   My bibliography  Save this paper

On the Extent of Economic Integration: A Comparison of E.U. Countries and U.S. States

Author

Listed:
  • Harry P. Bowen

    () (McColl School of Business, Queens University of Charlotte)

  • Haris Munandar

    () (Bureau of Economic Research, Bank Indonesia)

  • Jean-Marie Viaene

    () (Erasmus University Rotterdam, Tinbergen Institute and CESifo)

Abstract

European economic integration is commonly believed to be incomplete, and that further reforms are needed. In this context, the union of U.S. states is believed to be the benchmark model of complete economic integration and often serves as the basis for comparison as regarding the extent of E.U economic integration. Yet, with low trade barriers and with productive factors at least notionally mobile across E.U. countries, is the belief that U.S. states are more integrated than the E.U. correct? The objective of this paper is to examine the theoretical and empirical premises of such beliefs. We derive three theoretical predictions about the distribution of output and factor stocks that will arise among members of a fully integrated economic area (IEA) in which goods and factors are freely mobile and policies are harmonized. These theoretical predictions are then empirically tested using data on the output and factor stocks of 14 E.U. member states and the 51 U.S. states (includes District of Columbia)for the period from 1965 to 2000. The empirical results convincingly support each theoretical prediction and in particular indicate that, contrary to popular belief, the extent of E.U. economic integration is not statistically different from that among U.S. states.

Suggested Citation

  • Harry P. Bowen & Haris Munandar & Jean-Marie Viaene, 2008. "On the Extent of Economic Integration: A Comparison of E.U. Countries and U.S. States," Discussion Paper Series 2008-01, McColl School of Business, Queens University of Charlotte.
  • Handle: RePEc:msb:wpaper:2008-01
    as

    Download full text from publisher

    File URL: ftp://ftp.drivehq.com/msbftp/repec/pdfs/wpapers/msbwp2008-01.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Jan Eeckhout, 2004. "Gibrat's Law for (All) Cities," American Economic Review, American Economic Association, vol. 94(5), pages 1429-1451, December.
    2. Lucas, Robert E, Jr, 1990. "Why Doesn't Capital Flow from Rich to Poor Countries?," American Economic Review, American Economic Association, vol. 80(2), pages 92-96, May.
    3. Ramey, Garey & Ramey, Valerie A, 1995. "Cross-Country Evidence on the Link between Volatility and Growth," American Economic Review, American Economic Association, vol. 85(5), pages 1138-1151, December.
    4. Alicia H. Munnell, 1990. "Why has productivity growth declined? Productivity and public investment," New England Economic Review, Federal Reserve Bank of Boston, issue Jan, pages 3-22.
    5. Baldwin, Richard E. & Martin, Philippe, 2004. "Agglomeration and regional growth," Handbook of Regional and Urban Economics,in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 60, pages 2671-2711 Elsevier.
    6. repec:dgr:rugggd:200363 is not listed on IDEAS
    7. Ben R. Craig & William E. Jackson & James B. Thomson, 2004. "On SBA-guaranteed lending and economic growth," Working Paper 0403, Federal Reserve Bank of Cleveland.
    8. N. Gregory Mankiw & David Romer & David N. Weil, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 107(2), pages 407-437.
    9. Timmer, Marcel P. & Ypma, Gerard & Ark, Bart van der, 2003. "IT in the European Union: driving productivity divergence?," GGDC Research Memorandum 200363, Groningen Growth and Development Centre, University of Groningen.
    10. Yoshihiko Nishiyama & Susumu Osada & Yasuhiro Sato, 2008. "OLS ESTIMATION AND THE "t" TEST REVISITED IN RANK-SIZE RULE REGRESSION," Journal of Regional Science, Wiley Blackwell, vol. 48(4), pages 691-716.
    11. Viaene, Jean-Marie & Zilcha, Itzhak, 2002. "Capital markets integration, growth and income distribution," European Economic Review, Elsevier, vol. 46(2), pages 301-327, February.
    12. Harry Bowen & Leo Sleuwaegen, 2007. "European integration: the third step," International Economics and Economic Policy, Springer, vol. 4(3), pages 241-262, November.
    13. Luis A. Rivera-Batiz & Paul M. Romer, 1991. "Economic Integration and Endogenous Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 106(2), pages 531-555.
    14. Robert E. Hall & Charles I. Jones, 1999. "Why do Some Countries Produce So Much More Output Per Worker than Others?," The Quarterly Journal of Economics, Oxford University Press, vol. 114(1), pages 83-116.
    15. Xavier Gabaix, 1999. "Zipf's Law for Cities: An Explanation," The Quarterly Journal of Economics, Oxford University Press, vol. 114(3), pages 739-767.
    16. Harry Bowen & Haris Munandar & Jean-Marie Viaene, 2010. "How integrated is the world economy?," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 146(3), pages 389-414, September.
    17. Xavier Gabaix, 1999. "Zipf's Law and the Growth of Cities," American Economic Review, American Economic Association, vol. 89(2), pages 129-132, May.
    18. Gasper A. Garofalo & Steven Yamarik, 2002. "Regional Convergence: Evidence From A New State-By-State Capital Stock Series," The Review of Economics and Statistics, MIT Press, vol. 84(2), pages 316-323, May.
    19. Robert J. Barro, 1999. "Determinants of Democracy," Journal of Political Economy, University of Chicago Press, vol. 107(S6), pages 158-183, December.
    20. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-838, May.
    21. Gabaix, Xavier & Ioannides, Yannis M., 2004. "The evolution of city size distributions," Handbook of Regional and Urban Economics,in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 53, pages 2341-2378 Elsevier.
    22. Stijn Van Nieuwerburgh & Pierre-Olivier Weill, 2010. "Why Has House Price Dispersion Gone Up?," Review of Economic Studies, Oxford University Press, vol. 77(4), pages 1567-1606.
    23. Bowen, Harry P & Leamer, Edward E & Sveikauskas, Leo, 1987. "Multicountry, Multifactor Tests of the Factor Abundance Theory," American Economic Review, American Economic Association, vol. 77(5), pages 791-809, December.
    24. Florence Bouvet, 2010. "EMU and the dynamics of regional per capita income inequality in Europe," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 8(3), pages 323-344, September.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    economic integration; capital mobility; factor price equalization; Brownian motion; Zipf’s law;

    JEL classification:

    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • F15 - International Economics - - Trade - - - Economic Integration
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:msb:wpaper:2008-01. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (HP Bowen). General contact details of provider: http://edirc.repec.org/data/sbqueus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.