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East-West Integration and the Economic Geography of Europe

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  • Arne Melchior

Abstract

Implementation of the European internal market and East-West integration has been accompanied by dramatic change in the spatial distribution of economic activity, with higher growth west and east of a longitude degree through Germany and Italy. In the east, income growth has been accompanied by increasing regional disparities within countries. We examine theoretically and empirically whether European integration as such can explain these developments. Using a numerical simulation model with 9 countries and 90 regions, theoretical predictions are derived about how various patterns of integration may affect the income distribution. Comparing with reality, we find that a reduction in distance-related trade costs combined with east-west integration is best able to explain the actual changes in Europe's economic geography. This suggests that the implementation of the European internal market or the Euro has "made Europe smaller". In Central Europe, capital regions grow faster and there are few east-west growth differences inside countries. There is no convincing support for the hypothesis that European integration had adverse effects on non-members.

Suggested Citation

  • Arne Melchior, 2009. "East-West Integration and the Economic Geography of Europe," CASE Network Studies and Analyses 0379, CASE-Center for Social and Economic Research.
  • Handle: RePEc:sec:cnstan:0379
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    Cited by:

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    More about this item

    Keywords

    Income distribution; regional inequality; economic growth and convergence; European integration.;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F15 - International Economics - - Trade - - - Economic Integration
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure

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