DP651 Models of Economic Integration and Localized Growth

Author(s): Giuseppe Bertola
Publication Date: March 1992
Keyword(s): European Community, Externalities, Factor Mobility, Growth
JEL(s): O11, O19
Programme Areas: International Trade and Regional Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=651

Economic integration and free factor mobility may be expected to enhance the growth performance of a united Europe. Simple models of integration among independent, endogenously-growing economic entities suggest that factor mobility may deepen rather than reduce regional differences in economic performance, however. This paper studies interactions between static geographical externalities and dynamic investment decisions, and it finds that economic integration need not result in more efficient factor allocations or faster growth.