Citation

Discussion Paper Details

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Title: A Theory of Economic Unions

Author(s): Gino Gancia, Giacomo AM Ponzetto and Jaume Ventura

Publication Date: November 2019

Keyword(s): Economic unions, European integration and non-tariff barriers

Programme Area(s): International Macroeconomics and Finance, International Trade and Regional Economics and Public Economics

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 effects on trade, income distribution and welfare of economic unions that differ 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 sufficiently similar. However, differences 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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Bibliographic Reference

Gancia, G, Ponzetto, G and Ventura, J. 2019. 'A Theory of Economic Unions'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=14121