A sequential approach to regional integration: The European Union and Central and Eastern Europe

This paper develops a theory of optimal sequencing of regional integration and applies it to the specific question of Central and Eastern European countries (CEECs) and the EU. We show that the timing of transition and integration has implications for the long-term trade structure of Europe. In this model the interest to integrate the CEECs comes from harmonization of policies to attract industries. Without integration, European countries will try to inefficiently protect their industries. Because of the transfers implied by the CAP and the Structural Policies, the EU delays enlargement until the CEECs have sufficiently converged. CEECs might at this point prefer to stay outside the EU and attract industries by offering them more generous protection than the EU. Such timing may be inefficient ex ante for all countries because it may prevent full European integration in the long run, inducing firms to relocate outside of the EU and governments in the EU and the CEECs to inefficiently protect industry. During the transition, all countries benefit from regional integration among the CEECs.     

SOVEREIGNTY VERSUS SOUNDNESS: CROSS-BORDER/INTERSTATE BANKING IN THE EUROPEAN UNION AND IN THE UNITED STATES: SIMILARITIES, DIFFERENCES AND POLICY ISSUES

Banks are finally crossing borders within the European Union (EU) and the United States. Some EU member countries and some U.S. states have welcomed entry by banks from elsewhere, while others have resisted it. The article compares the processes of banking deregulation in the two unions and provides some measures of the ensuing progress—not yet complete—toward cross-border banking. The analysis focuses on resistance to entry, the reasons for it, and the methods used to put it into effect. Apportioning responsibilities for chartering, prudential supervision and other facets of the financial safety net between the EU and its member countries give rise to active conflicts over sovereignty and compromises over efficiency. Similar conflicts raise questions over the continued viability of the dual banking system in the United States. ( JEL F15, F36, G21)     

Quantifying globalization

Globalization is much debated, but is it possible to make reliable ranks of which countries are the most integrated internationally? Traditionally resort is taken to trade measures, but even considering only economic integration this measure disregards a number of aspects. This paper proposes a single measure or index of globalization based on several indicators of economic integration combined by use of the multivariate technique of factor analysis. The index is calculated for 23 OECD countries, and among the findings are that Ireland is ranked as the most globalized country during the 1990s, while the UK was at the top during the 1980s. Some of the most notable changes in the rankings are the decline of the USA, Canada, and to a lesser extent Japan and Norway. There are notable improvements in the ranking for Finland, Italy, Portugal, Spain and Sweden. For Portugal and Spain the changes seem to follow EU membership in the mid-1980s.     

Trade integration and the EU economic membership criteria

The purpose of this paper is to consider whether the European Union (EU)'s economic membership criteria for the Central and Eastern European countries (CEECs) and Cyprus (the Candidate Countries) are fulfilled. To this end, I examine the actual and potential levels of trade between the Candidate Countries and the EU countries using the gravity model. The results show a high degree of trade integration between all Candidate Countries and the EU, indicating that the Candidate Countries would not face any serious difficulties in coping with the competitive pressure and market forces within the Union in the medium term. The European Commission, however, suggested the contrary for some of the Candidate Countries in its opinions of 1997.     

Power laws in EU country exports

International trade flows are highly concentrated in the top units of analysis. In this paper, we study the size distribution of exports at the product level, using Comext data for the 28 EU countries over the period 2002–2014. We fit power law relationships running log rank–log size regressions. The estimated Pareto exponent may be interpreted as a single measure of the inequality between the top products; it thus constitutes an alternative to other measures of export diversification. The Pareto exponent estimates are quite stable for most EU countries between 2002 and 2014. However, some countries stand out for their increase or decrease in the Pareto exponent. Some preliminary evidence suggesting negative correlation between volatility in EU country exports and export diversification at the product level is also provided.     

Supranational integration and national reorganization: On the Maastricht treaty’s impact on fiscal decentralization in EU countries

We explore the implications of European integration for fiscal decentralization in EU member states with a dataset on 21 OECD countries over the 1975–2000 period. The difference-in-difference methodology is used to establish causality. EU member states are classified as the treatment and non-EU OECD countries as the control group. The Maastricht treaty is interpreted as a quasi-experimental policy intervention that substantially advanced European integration. Our results suggest that tax decentralization has increased in EU countries after the signing of the Maastricht treaty. The treaty’s effect on expenditure decentralization also seems to be positive, but is less clear-cut.     

Trade Structure during Accession to the EU

This article discusses the degree of trade restructuring between the EU and the new member states during the accession process. Intra-industry trade is selected as a composite indicator of trade structure. Factor endowments, market size and distance are the most important determinants of intra-industry trade. The estimations for the OECD countries are used to compute predictions for EU15 trade with the CEE countries. In general, this approach predicts well the EU15 trade structure with CEE, which proves significant restructuring in the new member states. High shares of intra-industry trade imply lower welfare losses and less resistance to further deepening of integration in the participating countries.     

Which commercial partners are important for the most recently admitted EU countries?

This paper describes the degree of trade integration inside the European Union (EU) after the fifth enlargement in 2004. To achieve this goal, we build a database of information on trade flows between the new EU countries (EU‐10) and 180 commercial partners in six different sectors from 1999 to 2011. Using the standard gravity model and estimating a difference‐in‐differences specification, we analyze how joining the EU affected the intensity and direction of the EU‐10's trade flows. Our results show that though trade exchanges between the EU‐10 and EU‐15 intensified after 2004, the impact of integration was much more significant to the EU‐10 group.     

An Incumbent Country View on Eastern Enlargement of the EU Part I: A General Treatment

An eastern enlargement of the EU, from an incumbent country point of view,involves a fiscal burden from extending Union agricultural and cohesion policiesto new members, coupled with potential gains as well as adjustment problemsderiving from an extended customs union and a larger single market. Enlargementis controversial, because the net effect is unclear, a priori, and will certainly vary across individual countries. Our two-part contribution tries to do shed light on this controversy. In this first part, we present a general treatment of the likely effects on different incumbent countries, while a subsequent companion paper will take a closer look at the specific case of Austria. The general view of part I, in turn, first focuses on various empirical measures highlighting crucial differences between incumbents, pertaining to the fiscal burden on the one hand, and integration gains on the other. We then argue that a proper evaluation must rely on an explicit welfare criterion, and we use a general model of economic integration in order to identify the principalchannels through which aggregate welfare of an incumbent country is affected by an enlargement of the EU. We address traditional effects of trade creation and trade diversion, as well as growth effects arising from an abolition of trade barriers. In addition, we ask how enlargement affects foreign direct investmentand labor migration, and what this implies in welfare terms for an incumbent western European country. Taken together, these effects generate a certain presumption of integration gains, which need to be set against the fiscal burden. However, a final judgement requires a case-by-case approach, based on empirical implementations of enriched and parameterized models for specific countries. The companion paper, therefore, uses a suitably specified, calibrated dynamic equilibrium model, in order to take a closer look at the Austrian case.     

Life cycle employment and fertility across institutional environments

In this paper, we formulate a dynamic utility maximization model of female labor force participation and fertility choices and estimate approximate decision rules using data on married women in Italy, Spain and France. The estimated decision rules indicate that first-order state dependence is the most important factor determining female labor supply behavior in all three countries. We also find that cross-country differences in state dependence effects are consistent with the order of country-level measures of labor market flexibility and child care availability. Counterfactual simulations of the model indicate that female employment rates in Italy and Spain could reach EU target levels were French social policies to be adopted in those countries.     

Private savings and transition

After the collapse in the early transition years, saving rates in Eastern European EU‐accession countries have recovered strongly. But is private saving in these countries now driven by the same forces as in the EU? A GMM estimator is applied to analyze the determinants of private saving in both country groups. The main results are: saving rates are rather persistent; income growth increases saving, whereas public saving crowds out private saving. There is evidence that in both country groups domestic saving and foreign capital operate at least partly as substitutes, which is an indicator for international financial integration. The long‐run effects of income growth and public saving are larger in the EU‐15 than in the EU‐accession countries.     

Nominal and real convergence between the CEE countries and the EU: a fractional cointegration analysis

This paper examines the real and nominal convergence between the Central and Eastern European countries and the EU, using fractional cointegration analysis for the period 1980–2003. Fractional cointegration analysis is a flexible methodology, which allows for more subtle forms of mean reversion. The tests performed are those of Geweke and Porter-Hudak. The convergence processes are valid when macroeconomic time series used in the study are fractionally cointegrated. The results indicate that inflation and interest rates series of six sample countries are fractionally cointegrated with those of the EU. Therefore, nominal convergence has been achieved by some of the transition countries, but the equilibrium errors display long memory. Results also indicate that industrial outputs of most countries in the sample are not fractionally cointegrated with that of the EU. The results further indicate that both nominal and real convergence have been achieved only for Hungary.     

The effects of economic and political integration on fiscal decentralization: evidence from OECD countries

Abstract .  This paper examines the impact of economic and political integration on the vertical government structure. It argues that, by increasing the market size and the benefits of decentralized provision of public goods, integration triggered the recent process of decentralization in OECD countries. A panel analysis relates the degree of fiscal decentralization to economic and European integration, controlling for interregional heterogeneity, economies of scale, and institutions. The results mostly support a decentralizing effect of economic integration in general and of European integration in particular for heterogeneous EU countries, whereas participation of subnational governments in national decision-making is associated with more centralization.     

Transitional Progress and Business Challenges

Eight Central European and Baltic countries have joined the European Union in May 2004. Transitioning economies need to develop a business environment with a healthy financial sector to realize economic growth. This paper uses two classification methods, the discriminant analysis and taxonomic measure, to investigate the possibility of the South Eastern European and Commonwealth of Independent transitional countries to develop an enterprise and business environment that is compatible with the newest European Union (EU8) members. This paper found that the EU8 countries are correctly classified as having transitioned successfully in their business development. Bulgaria and Croatia have transitioned closely to the EU8. However, Romania, Ukraine, and the Commonwealth of Independent countries are not close to the EU8 in achieving a compatible business environment.      

Introduction: Is the European Union Capable of Integrating Diverse Models of Capitalism?

ABSTRACT

The causes and consequences of the Euro crisis have led comparative political economy scholars to question whether European integration can accommodate diverse models of capitalism. This special issue addresses two important questions about the compatibility of diverse growth models within the European Union (EU): Are some growth regimes better suited to European integration than others? and does the EU favour a particular constellation of domestic institutions? Contributions within this special issue provide a qualified yes to these questions, concluding that the EU favours export-led growth models whilst it penalises and discourages domestic consumption-oriented growth paths, particularly those that are financed by debt accumulation. While recent comparative capitalism literature highlights that European monetary integration has favoured export-led growth regimes, contributions in this special issue outline that the EU’s prioritisation of export-led growth over domestic demand-led growth is present in other facets of integration, including EU accession, financial integration, the free movement of people, fiscal governance and the Europe 2020 growth strategy. Findings here provide important insights for both the European integration and comparative capitalism literature, highlighting that the unique economic ties being forged within the European project may be problematic for those countries outside northwestern Europe and for workers in low-wage domestic sectors.     

Selected transition and Mediterranean countries: an institutional primer on EMU and EU accession

The paper examines the institutional channels through which Economic and Monetary Union (EMU) in the European Union (EU) can affect the transition countries of Central and Eastern Europe and three Mediterranean countries that aspire to join the EU.
After describing the current institutional framework for relations between the EU and these countries, the paper considers two categories of institutional implications of EMU. The first stems from the need to satisfy the Maastricht convergence criteria before joining the euro area. Although the Maastricht criteria are not accession criteria, many of the countries reviewed are already formulating their macroeconomic policies in a way that will facilitate convergence toward the Maastricht targets. The second implication stems from the need to adopt the EU's institutional and legal provisions in the area of EMU, such as those referring to the establishment of independent central banks, the prohibition of central bank financing of the government and the liberalization of capital movements. Finally, the paper discusses some of the key policy issues that EMU raises for the countries reviewed, in particular regarding exchange rate policy, capital account liberalization and the possible conflict between growth-enhancing measures and the Maastricht criteria.     

European Integration,Capitalist Diversity and Crises Trajectories on Europe’s Eastern Periphery

ABSTRACT

European policy responses to the Global Financial Crisis and its European manifestation have set off a scholarly debate whether different national varieties of capitalism are equally able to cope with deepened European integration. To date, this debate has mostly focused on the contrasting fates of the thriving northern export-oriented capitalisms and the ailing southern European ones. This paper seeks to broaden the debate by focusing on Europe’s Eastern periphery. It argues that a combination of domestic transformation strategies and the EU’s accession policies resulted in two different growth regimes on Europe’s Eastern periphery: a dependent export-driven in the Visegrád countries and a dependent debt-driven in the Baltic States. On the basis of the pre- and post-crisis trajectories of these two growth models, this paper finds that because East Central European capitalisms were profoundly shaped by EU integration, they are on balance also more compatible with deepened integration than Southern European capitalisms.     

欧盟鼓励中小企业创新的政策与措施

本文分析了欧盟促进中小企业发展与创新的政策和措施。“首先想到小的”已成为欧盟制定政策的原则。本文指出,《欧洲小企业法》总结了多年来欧盟积极鼓励中小企业发展的一些好做法,是欧盟第一个促进中小企业发展的综合性政策框架,该文件提出了促进中小企业发展的十项原则。介绍了欧盟支持中小企业创新的主要措施,并提出了成立政策性金融中介机构、扶持中小企业创新要有针对性以及加强政策集成等政策建议。     

What drives trade in services? Lessons from the Nordics

This article makes an empirical assessment of the relative importance of non-actionable institutional and cultural factors and actionable policy measures for services market integration, using the Nordic countries as a case study. The Nordics are an ideal case as they are perceived to be a cluster of similar countries, but they have chosen different relations to the European Union (EU) and the rest of the world. First, comparing actionable and non-actionable determinants of services trade, I find that policy-determined free trade agreements (FTAs) boost services trade by 75% and a single market by an additional 45%, while the accumulated effect of all standard non-actionable shared geographical, institutional and cultural features (sharing a land border, language, colonial past and legal origin) almost triples services trade. Having controlled for all these determinants, intra-Nordic trade in services is more than three times the predicted value. An unexplained Nordic bias of this magnitude indicates that full integration of services markets may rely on deeper institutional and cultural factors.     

Trade effects of regional integration: A panel cointegration analysis

The paper quantifies the most likely trade effects of the exceptional cases of the GATT/WTO system, namely, Regional Integration Agreements, on the selected member as well as non-member countries of the EU, NAFTA, MERCOSUR and AFTA. To this end, the gravity model was estimated through fixed effects model and panel cointegration analysis. It was found that the explanatory power of the latter has superseded the former one. For the case of EU, it was found that the intra-union trade-creation effect is approximately six times larger than extra-union effects. In NAFTA, exports to outside countries are significantly diverted. For MERCOSUR, on the other hand, results indicate that the integration has not contributed to intra-union trade. The members are still significantly dependent on extra-union imports, just like the members of AFTA.