IDEAS home Printed from
   My bibliography  Save this paper

East-West Integration and the Economic Geography of Europe


  • Arne Melchior


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

    Download full text from publisher

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. André Sapir & Richard Baldwin & Daniel Cohen & Anthony Venables, 1999. "Market integration, regionalism and the global economy," ULB Institutional Repository 2013/8074, ULB -- Universite Libre de Bruxelles.
    2. James E. Anderson & Eric van Wincoop, 2004. "Trade Costs," Journal of Economic Literature, American Economic Association, vol. 42(3), pages 691-751, September.
    3. Crozet, Matthieu & Koenig Soubeyran, Pamina, 2004. "EU enlargement and the internal geography of countries," Journal of Comparative Economics, Elsevier, vol. 32(2), pages 265-279, June.
    4. Michaela Dodini & Marco Fantini, 2006. "The EU Neighbourhood Policy: Implications for Economic Growth and Stability," Journal of Common Market Studies, Wiley Blackwell, vol. 44, pages 507-532, September.
    5. Krugman, Paul, 1980. "Scale Economies, Product Differentiation, and the Pattern of Trade," American Economic Review, American Economic Association, vol. 70(5), pages 950-959, December.
    6. Sjef Ederveen & Henri L . F. Groot & Richard Nahuis, 2006. "Fertile Soil for Structural Funds?A Panel Data Analysis of the Conditional Effectiveness of European Cohesion Policy," Kyklos, Wiley Blackwell, vol. 59(1), pages 17-42, February.
    7. James E. Anderson & Yoto V. Yotov, 2010. "The Changing Incidence of Geography," American Economic Review, American Economic Association, vol. 100(5), pages 2157-2186, December.
    8. Puga, Diego, 1999. "The rise and fall of regional inequalities," European Economic Review, Elsevier, vol. 43(2), pages 303-334, February.
    9. Andrés Rodríguez-Pose & Vassilis Tselios, 2010. "Inequalities in income and education and regional economic growth in western Europe," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 44(2), pages 349-375, April.
    10. Michael Landesmann & Roman Römisch, 2006. "Economic Growth, Regional Disparities and Employment in the EU-27," wiiw Research Reports 333, The Vienna Institute for International Economic Studies, wiiw.
    11. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-499, June.
    12. Diego Puga, 2002. "European regional policies in light of recent location theories," Journal of Economic Geography, Oxford University Press, vol. 2(4), pages 373-406, October.
    13. Forslid, Rikard & Haaland, Jan I. & Midelfart Knarvik, Karen Helene, 2002. "A U-shaped Europe?: A simulation study of industrial location," Journal of International Economics, Elsevier, vol. 57(2), pages 273-297, August.
    14. Yuri Andrienko & Sergei Guriev, 2004. "Determinants of interregional mobility in Russia," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 12(1), pages 1-27, March.
    15. Peter Egger & Peter Huber & Michael Pfaffermayr, 2005. "A note on export openness and regional wage disparity in Central and Eastern Europe," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 39(1), pages 63-71, March.
    16. Dirk Stelder, 2005. "Where Do Cities Form? A Geographical Agglomeration Model for Europe," Journal of Regional Science, Wiley Blackwell, vol. 45(4), pages 657-679.
    17. Behrens, Kristian & Lamorgese, Andrea R. & Ottaviano, Gianmarco I.P. & Tabuchi, Takatoshi, 2007. "Changes in transport and non-transport costs: Local vs global impacts in a spatial network," Regional Science and Urban Economics, Elsevier, vol. 37(6), pages 625-648, November.
    18. Aadne Cappelen & Jan Fagerberg & Bart Verspagen, 1999. "Lack of regional convergence," Working Papers Archives 1999001, Centre for Technology, Innovation and Culture, University of Oslo.
    19. Johannes Bröcker & Martin Schneider, 2002. "How Does Economic Development in Eastern Europe Affect Austria's Regions? A Multiregional General Equilibrium Framework," Journal of Regional Science, Wiley Blackwell, vol. 42(2), pages 257-285.
    20. Marius Brülhart & Pamina Koenig, 2005. "New Economic Geography meets Comecon: Regional Wages and Industry Location in Central Europe," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 05.01, Université de Lausanne, Faculté des HEC, DEEP.
    21. Gluschenko, Konstantin, 2006. "Biases in cross-spave comparisons through cross-time price indexes : the case of Russia," BOFIT Discussion Papers 9/2006, Bank of Finland, Institute for Economies in Transition.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Marius Brülhart, 2011. "The spatial effects of trade openness: a survey," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 147(1), pages 59-83, April.

    More about this item


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

    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

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    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:sec:cnstan:0379. 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: (Aleksandra Polak). General contact details of provider: .

    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.