DP15078 Choosing Institutional over Economic Integration: Are There Growth Effects?

Author(s): Nauro F. Campos, Fabrizio Coricelli, Luigi Moretti
Publication Date: July 2020
Keyword(s): economic integration, European Union, Institutional integration
JEL(s): C33, F15, F55, O43, O52
Programme Areas: International Macroeconomics and Finance
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=15078

This paper studies the effects on productivity of integration deepening. Our identification strategy uses the 1995 European Union (EU) enlargement when all four candidate countries joined the European Economic Area (economic integration) but only one (Norway) chose not to join the EU (institutional integration). Using synthetic control methods on sectoral and regional data, we find that had Norway chosen institutional instead of only economic integration in 1995, the average Norwegian region would have experienced a yearly average productivity growth increase of about half a percentage point. We also find these losses are larger for industry than for other sectors.