THEORY OF ECONOMIC INTEGRATION dr Katarzyna Śledziewska Lecture; 30 hrs Spring semester Course description: The aim of this course is to equip students with a thorough, unbiased and critical understanding of the main economic issues that arise in the context of integration. The course introduces students to, and develops their understanding of, economic integration in the world by presenting concepts, theory and empirical work. Focusing on the European Union and other PTAs (Preferential Trading Areas), it examines the economic processes, problems and policies of integration in the recent past, currently and in prospect. Course objectives: The course is designed for students with a solid background in international economic theory. The specific student learning outcomes and experiences are: to understand the development and workings of the EC/EU and other PTAs; to become familiar with the key literature on economic integration. The course will be structured in six Sections. For each Section, links to internet-based resources will be added below as the academic year progresses. Course outline: 1. Descriptive background (4 h) What is economic integration Definition and significance The stages of economic integration Preferential Trading Areas in world economy WTO rules Preferential Trade Agreements and the Multilateral Trade System Basic Principles of EU & Institutions Post-War economic integration in Western Europe The decision-making institutions of the EU The budget of the EU Baldwin and Wyplosz: ch. 1-3 Dyker D. ch. 2, 3, 4 Hiritis T. ch. 1, 2, 4 McDonald F., Dearden S. ch.1, 4
Pelkmans ch. 1-4 Baldwin, R. and Widgrén, M. 2004 Winners and Losers under Various Dual Majority Rules for the EU Council of Ministers, CEPR Discussion Papers, No. 4450. Kauppi, H. and Widgrén, M. 2004 What Determines EU Decision Making? Needs, Power or Both?, Economic Policy, vol. 39, pp. 221-266 2. Product-market integration in a neoclassical world (6h) Analysis of discriminatory liberalization Analysis of a free trade agreements Analysis of a custom union Empirical evidence Creation and diversion effects in empirical studies Estimated Effects of Trading Blocks : Baldwin, Wyplosz., ch. 5 Pelkmans ch. 5-6 Bohara Alok K., Kishore Gawande and Pablo Sanguinetti Trade diversion and declining tariffs: evidence from Mercosur Journal of International Economics Vol. 64, Issue 1, October 2004, Pages 65-88 Clausing, Kimberly A. 2001. Trade Creation and Trade Diversion in the Canada-United States Free Trade Agreement. Canadian Journal of Economics. Vol. 34, No. 3, August, pp. 677-96 Eric W. Bond, Raymond G. Riezman and Constantinos Syropoulos A strategic and welfare theoretic analysis of free trade areas Journal of International Economics Vol. 64, Issue 1, October 2004, Pages 1-27 Frankel Jeffrey A. (1997) Regional Trading Blocs in the World Economic System, ch. 1 (see at: http://bookstore.iie.com/merchant.mvc?screen=prod&product_code=72) Ghosh Sucharita and Steven Yamarik Are regional trading arrangements trade creating?: An application of extreme bounds analysis Journal of International Economics Vol. 63, Issue 2, Pages 369-395 Greenaway D. and C. Milner Regionalism and Gravity The Scottish Journal of Political Economy, Vol.49, pp.574-585 (2002 Grossman G., Helpman E. 1995 The politics of free trade agreements American Economic Review, 85, pp.667-690 Krishna P. 1998 Regionalism and multilateralism: a political economy approach Quarterly Journal of Economics, 113, pp227-251 Krishna P. 2005. The Economics of Preferential Trade Agreements Handbook of International Trade, vol. 2 Krueger Anne O. 1995 Free Trade Agreements versus Customs Unions NBER Working Paper No. 5084
Krueger Anne O. December 1999 Trade Creation and Trade Diversion Under NAFTA NBER Working Paper Natalie Chen Intra-national versus international trade in the European Union: why do national borders matter? Journal of International Economics Vol. 63, Issue 1 Pages 93-118 Panagariya A. 1999. Preferential trade liberalization: The traditional theory and new developments, University of Maryland, mimeo Panagariya A. Bhagwati J. 1996 The economics of Preferential Trade Agreements The AEI Press, ch. 1 Panagariya Arvind and Rupa Duttagupta 2002 Politics of free trade areas: tariffs versus quotas Journal of International Economics Vol. 58, Issue 2, Pages 239-496 Paragariya A. Krishna P. 2002 On existence of necessarily welfare improving free trade areas Journal of International Economic, 57, pp. 353-367 Scott L. Baier and Jeffrey H. Bergstrand Economic determinants of free trade agreements Journal of International Economics Vol. 64, Issue 1, October 2004, Pages 29-63 Shelton, Nicholls. 1998. Measuring Trade Creation and Trade Diversion in the Central American Common Market: A Hicksian Alternative World Development. Vol. 26. No. 2. pp. 323-35 3. Market Size and Scale Effects (4h) New Trade Theory : Increasing Returns and Imperfect Competition Monopoly, international duopoly, and the gains from trade through increasing competition Monopolistic competition and the gains from trade through increasing product variety New Economic Geography : Externalities and Agglomeration Economies The "core-periphery" model Welfare effects and multiple locations Empirical evidence on location patterns in the European Union Terms of Trade Effects Baldwin Richard, Charles Wyplosz. ch. 6 Dierx A., Ilzkovitz F., Sekkat K. Ch. 3-5 Dyker ch.9 Chang, W., Winters, L.A., (2002). How regional blocs affect excluded countries: the price effects of MERCOSUR. American Economic Review, Egger P. Pfaffermayr M. 2004 Foreign Direct Investment and European Integration in the 1990s Blackwell Publishing pp. 99-110 Feenestra R. (2002) Advanced International Trade. Theory and evidence Princeton University Press, ch.6 Gasiorek Michael, Alasdair Smith & Anthony J. Venables 2002 The Accession of the UK to the EC: A Welfare Analysis Journal of Common Market Studies, Vol. 40, Issue 3, Page 425-447 Gustavsson (2002) 'Dynamics of European Industrial Structure', FIEF working paper, No. 176 Journal of International Economics Pages 419-436 Volume 63, Issue 2
Mette Yde Skaksen and Jan Rose Sørensen Should trade unions appreciate foreign direct investment Journal of International Economics Volume 55, Issue 2, Pages 243-470 (December 2001) Pinelopi K. Goldberg, Frank Verboven Market integration and convergence to the Law of One Price: evidence from the European car market Journal of International Economics Volume 65, Issue 1, January 2005, Pages 49-73 Yongmin Chen, Jota Ishikawa and Zhihao Yu Trade liberalization and strategic outsourcing Puga, Diego 2002 European Regional Policies in Light of Recent Location Theories, Journal of Economic Geography, vol. 2, no. 4, October, pp. 373-406 4. Microeconomics of Factor Market Integration (6h) Essential theory Single European Market Empirical studies The 1996 Review of the Single European Market programme Evidence of the effects of the SEM since 1996 Baldwin Richard, Charles Wyplosz. 2004. ch. 7.4-5 Pelkmans ch. 6.6-7, 9-10 McDonald F., Dearden S. ch. 1 Dyker D. Ch. 5-6 Hitiris ch. 3 Allen, C. Gasiorek M., Smith M.A.M 1998 The competition effects of the Single Market Economic Policy Andersen, Torben M.; Haldrup, Niels; Sørensen, Jan Rose 2000 Labour market implications of EU product market integration Economic Policy, Vol. 15 Issue 30, p107, Baldwin, R (1989), The Growth Effects of 1992, Economic Policy, Vol.2, pp.247-281. Bottasso, A. and Sembenelli, A. (2001), "Market power, productivity and the EU Single Market Programme: Evidence from a panel of Italian firms", European Economic Review,V. 45, 167-186. Bover, Olympia; García-Perea, Pilar; Portugal, Pedro 2000 Labour market outliers: Lessons from Portugal and Spain Economic Policy, Vol. 15 Issue 31, p379, 50p Brülhart, M. (2001) "Evolving Geographical Specialisation of European Manufacturing Industries". Weltwirtschaftliches Archiv, vol. 137, pp. 215-243. Ciccone, A. (2002) "Agglomeration Effects in Europe". European Economic Review, Vol. 46, pp. 213-227. European Commission (1996) The 1996 Single Market Review: Background Information for the Report to the Council and European Parliament Commission Staff Working Paper, Brussels European Commission (1996), The impact and effectiveness of the Single Market, COM(96) 520 final.
Mariassunta Giannetti 2002 The effects of integration on regional disparities: Convergence, divergence or both? European Economic Review, Vol. 46, Issue 3, March, Pages 539-567 Notaro, G. 2002, "European Integration and Productivity: Exploring the Gains of the Single Market", London Economics, Working Paper Pelkmans J 2002, "Mutual Recognition in Goods and Services: an Economic Perspective" BEEP briefing n 2 (December 2002) Salgado, R. 2002, "Impact of structural reforms on productivity growth in industrial countries", IMF Working Paper Sauner-Leroy Jacques-Bernard 2003 The impact of the implementation of the Single Market Programme on productive efficiency and on mark-ups in the European Union manufacturing industry, European Economy. European Commission Directorate, economic Papers N 192 Overman, Henry G; Puga, Diego 2002 Unemployment Clusters across Europe's Regions and Countries, Economic Policy: A European Forum, vol. 0, no. 34, April, pp. 115-43 5. Macroeconomic issues (4h) European Macroeconomic cooperation Growth Effects Product market reforms and the macroeconomic performance Baldwin Richard, Charles Wyplosz. ch. 7.1-7.3 Dierx A., Ilzkovitz F., Sekkat K. ch. 6-8 Pelkmans ch. 16 Dyker ch.7 Henrekson M., Torstensson J. Torstensson R. 1997 Growth effects of European Integration European Economic Review, 41, pp. 1537-57 Crafts, Nicholas 2000 Globalization and Growth in the Twentieth Century International Monetary Fund, IMF Working Papers: 00/44 Baldwin, Richard E; Forslid, Rikard 1999 Incremental Trade Policy and Endogenous Growth: A q-theory Approach, Journal of Economic Dynamics and Control, vol. 23, no. 5-6, April, pp. 797-822 Baldwin, Richard E; Forslid, Rikard 2000 Trade Liberalisation and Endogenous Growth: A q- Theory Approach, Journal of International Economics, vol. 50, no. 2, April, pp. 497-517 Baldwin, Richard E; Forslid, Rikard 2000 The Core-Periphery Model and Endogenous Growth: Stabilizing and Destabilizing Integration, Economica, vol. 67, no. 267, August, pp. 307-24 6. Monetary integration (6h) A Costs of a common currency Theory of Optimum Currency Areas Costs and benefits compared European Monetary System European Central Bank European Monetary Policy
Baldwin & Wyplocz ch. 10, 12, 13, 14 Eijffinger & de Haan ch. 1-3 Artis and Nixson ch. 12 De Grauwe ch 1, 2, 3, 5, 7, 8 Pelkmans ch. 16, 17 De Grauwe P. 2002 Challenges for monetary policy in Euroland, Journal of Common Market Studies, November pp 693-718 De Grauwe, Paul; Kouretas, Georgios P, 2004 EMU: Current State and Future Prospects Journal of Common Market Studies, vol. 42, no. 4, Special Issue Nov., pp. 679-87 De Grauwe, Paul; Schnabl, Gunther 2004, EMU Entry Strategies for the New Member States Review of European Economic Policy, vol. 39, no. 5, Sept.-Oct., pp. 241-46 De Grauwe, Paul; Senegas, Marc-Alexandre, 2004 Asymmetries in Monetary Policy Transmission: Some Implications for EMU and Its Enlargement Journal of Common Market Studies, vol. 42, no. 4, Special Issue Nov., pp. 757-73 Eckhard Hein and Achim Truger European Monetary Union: nominal convergence, real divergence and slow growth? Structural Change and Economic Dynamics, Vol. 16, Issue 1, March 2005, Pages 7-33 Frankel J. Rose A. 2000 Estimating the effects of currency unions on trade and output. NBER Working Paper 7857 Glick R. Rose A. 2002 Does a currency union affect trade? The time series evidence. European Economic Review 46, pp. 1125-1151 Hau, Harald; Killeen, William; Moore, Michael 2002 How has the euro changed the foreign exchange market? Economic Policy, Apr, Vol. 17 Issue 34, p149, 43p Micco A., Stein E., Ordonez G. 2003 The currency union effect on trade: early evidence from EMU, Economic Policy, October, pp.317-356 Orlowski Lucjan T. Monetary convergence of the EU accession countries to the eurozone: A theoretical framework and policy implications Journal of Banking & Finance Vol. 29, Issue 1, January 2005, Pages 203-225 Required readings: The course does not follow a unique textbook, but it draws on the following titles: Baldwin, Richard and Wyplosz, Charles 2004 The Economics of European Integration, McGraw-Hill (lecture slides http://hei.unige.ch/~baldwin/papersbooks/bw/slides.htm) De Grauwe 2003 Economics of Monetary Union (5th ed) Oxford Dierx A., Ilzkovitz F., Sekkat K. (2005) European Integration And The Functioning Of Product Markets Edward Elgar Dyker D. 1999 The European Economy, Longman Eijffinger & de Haan 2000 European Monetary and Fiscal Policy, Oxford Hiritis T. 2003 European Union Economics Prentice Hall McDonald F., Dearden S. 2005 European Economic Integration, Prentice Hall Pelkmans 2001 European Integration 2nd ed FT Prentice Hall
Suggested readings: The other textbooks like: Hansen, J.D. and Nielsen, J.U. 1997 An Economic Analysis of the EU, 2nd edition, McGraw-Hill. Molle, Willem 2001 The Economics of European Integration, 4th edition, are also recommended.