Series: Working Papers. 9603.
Author: Barbara Dluhosch.
Topics: European Union | Exchange rates | Regional analysis | Competitiveness | Non-financial corporations, businesses.
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Abstract
The removal of barriers to trade and mobility is usually promoted as it allows for greater division of labor and, thereby, for improved economic welfare. Recent theory, however, suggests that the integration of markets might have serious consequences for the regional allocation of economic activity. In particular, economies of scale and distance to the market are said to put the periphery at a disadvantage, thus promoting regional divergence rather than convergence in per capita incomes. By focussing on European economic integration and the experience of Spain joining the EU, the paper shows that this view frequently stems from a competitiveness approach to economic integration which need not hold on an aggregate level.