The Political Economy of Regional Integration Projects at Borders Where Rich and Poor Meet: The Role of Cross-Border Shopping and Community Sorting

48 Pages Posted: 15 Apr 2008

See all articles by Kristof Dascher

Kristof Dascher

University of Regensburg - Faculty of Business, Economics & Information Systems

Alexander Haupt

University of Plymouth - Plymouth Business School; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: April 2008

Abstract

At borders where rich and poor countries meet, services prices differ hugely. In principle, price differentials could be exploited to mutual benefit, offering improved job opportunities to the poor as well as better shopping opportunities to the rich. However, cross-border shopping is often limited by the substantial transaction costs of crossing the border. Moreover, local governments frequently fail to cut these transaction costs even where they have the opportunity to do so. In this paper, we show (i) why a majority of the local electorate often backs this outcome, (ii) how intra-country mobility affects local policy, and (iii) how (inter-) national regulations shape local decisions.

Keywords: cross-border shopping, community sorting, regional integration, voting, federalism

JEL Classification: F15, H7, R2, D72

Suggested Citation

Dascher, Kristof and Haupt, Alexander, The Political Economy of Regional Integration Projects at Borders Where Rich and Poor Meet: The Role of Cross-Border Shopping and Community Sorting (April 2008). CESifo Working Paper Series No. 2280. Available at SSRN: https://ssrn.com/abstract=1120689

Kristof Dascher

University of Regensburg - Faculty of Business, Economics & Information Systems ( email )

Universitätsstr. 31
Regensburg, 93053
Germany

Alexander Haupt (Contact Author)

University of Plymouth - Plymouth Business School ( email )

Mast House
Plymouth, Devon PL4 8AA
United Kingdom

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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