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A theory of economic unions

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Abstract

After decades of successful growth, economic unions have recently become the focus of heightened political controversy. We argue that this is partly due to the growth of trade between countries that are increasingly dissimilar. We develop a theoretical framework to study the e§ects on trade, income distribution and welfare of economic unions that di§er in size and scope. Our model shows that political support for international unions can grow with their breadth and depth as long as member countries are su¢ ciently similar. However, di§erences in economic size and factor endowments can trigger disagreement over the value of unions between and within countries. The model is consistent with some salient features of the process of European integration and statistical evidence from survey data.

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  • Gino Gancia & Giacomo A. M. Ponzetto & Jaume Ventura, 2019. "A theory of economic unions," Economics Working Papers 1665, Department of Economics and Business, Universitat Pompeu Fabra.
  • Handle: RePEc:upf:upfgen:1665
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    Cited by:

    1. Gianmarco Daniele & Amedeo Piolatto & Willem Sas, 2018. "Who Sent You? Strategic Voting, Transfers and Bailouts in a Federation," Working Papers. Serie AD 2018-05, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    2. Gianmarco Daniele & Amedeo Piolatto & Willem Sas, 2020. "Does the Winner Take It All? Redistributive Policies and Political Extremism," Working Papers 1157, Barcelona School of Economics.
    3. Gracia-Lázaro, Carlos & Dercole, Fabio & Moreno, Yamir, 2022. "Dynamics of economic unions: An agent-based model to investigate the economic and social drivers of withdrawals," Chaos, Solitons & Fractals, Elsevier, vol. 160(C).
    4. Jorge SÁ & Ana Lúcia LUÍS, 2022. "Within Economic Blocks, Countries And States Tend To Diverge (Not Converge)," Regional and Sectoral Economic Studies, Euro-American Association of Economic Development, vol. 22(2), pages 37-44.

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    More about this item

    Keywords

    Economic unions; non-tariff barriers; European intergation;
    All these keywords.

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F55 - International Economics - - International Relations, National Security, and International Political Economy - - - International Institutional Arrangements
    • F62 - International Economics - - Economic Impacts of Globalization - - - Macroeconomic Impacts
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation

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