Abstract
Deeper regional integration is associated with the reduction of barriers to trade and factor flows. Barriers to trade are reduced between the members of the integration bloc and might be altered vis-à-vis the rest of the world. At more advanced stages (especially in a common market or an economic union), regional integration is accompanied by policies jointly pursued by the member states in the integration bloc. With respect to trade liberalization, a wide variety of measures are adopted in the course of integration. Trade liberalization is not at all limited to tariff reductions. In later stages of integration, the removal of non-tariff barriers comes to the fore. Technical, administrative, safety, and health regulations, as well as discriminatory national procurement policies are considered to be far more important than tariffs (cf. e.g. Commission (1988b)). The creation of the European Common Market (Europe 1992) was in most respects equivalent to the reduction of such non-tariff impediments to inner-community trade. In the following sections as well as in chapter 6, we look at trade liberalization via tariff reductions, as well as via lower non-tariff barriers to trade.
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The discussion in this subsection is based on Walz (1995b).
Whereas here the division of the work force is given, Walz (1996b) considers the impact of a more liberal migration policy when the division of workers in skilled and unskilled workers is endogenously determined. In this model, however, a much simpler production structure is employed.
In a dynamic context, migration costs are fixed costs which are weighted against expected future gains from migration. Hence, migration displays an investment decision which requires an intertemporal maximization approach (cf. Krugman (1991c)). Our approach is an abbreviated version of this much more complex decision process.
Two additional external effects of an extra input brand exist. First, innovators do not take into account the extra gain in productivity of Y-producers associated with an additional input variety (“consumer-surplus” effect) into account. Secondly, a new input brand intensifies competition in the intermediate-goods sector and thereby diminishes the profitability of existing intermediate-goods producers (profit destruction effect). The “consumer surplus” effect leaves the economy with too little innovation and the profit destruction effect implies an overaccumulation of knowledge. Grossman/Helpman (1991, p. 82f), however, show that in models of increasing brand variety and a CES-function, these two effects exactly outweigh each other. The “net” externality is just equal to the knowledge spillover effect. See Benassy (1998) for further discussion of this issue.
An exception to the latter is Wooton (1988).
Anderson and Marcouiller (1998) even stress the issue of legal insecurity as an informal barrier to trade.
This modeling approach is also pursued in Baldwin (1989, 279).
Further issues in this respect are discussed in Walz (1996a).
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© 1999 Physica-Verlag Heidelberg
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Walz, U. (1999). Deeper Regional Integration. In: Dynamics of Regional Integration. Contributions to Economics. Physica-Verlag HD. https://doi.org/10.1007/978-3-642-99807-2_5
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DOI: https://doi.org/10.1007/978-3-642-99807-2_5
Publisher Name: Physica-Verlag HD
Print ISBN: 978-3-7908-1185-8
Online ISBN: 978-3-642-99807-2
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