Transition Without Accession. Effects of Differential Integration on Trade and Welfare in a European Perspective

CEPS Working Document No. 168

28 Pages Posted: 23 May 2001

See all articles by Stefano Manzocchi

Stefano Manzocchi

LUISS University; Luiss University - Department of Economics and Finance

Cinzia Alcidi

CEPS; Graduate Institute of International and Development Studies (IHEID)

Date Written: June 2001

Abstract

In the past decade, we observed an acceleration of Western European integration, while the transition countries of Central Eastern Europe have not become members of the EU. In this paper, we conduct numerical simulations on the consequences of such a kind of differential integration within the European economic area with a spatial model of endogenous growth. Three main aspects are analysed: first, we look at the impact of inclusion in, or exclusion from, the EU on the localisation of "advanced" industries. Second, we consider the consequences for trade and capital flows (foreign direct investment) of the re-localisation of enterprises due to differential integration. Third, we analyse the welfare effects for insiders and outsiders from a dynamic viewpoint (that is, accounting for different growth regimes and transition). We find that, while outsiders always lose in welfare terms relative to insiders if transition is not accounted for, when transition is explicitely introduced it is possible for an outsider to perform better than the insiders. Hence, the model suggests that successful transition might provide a remedy against delayed accession to an integrated area.

Keywords: Transition economies, trade and monetary integration, economic geography, Central Eastern Europe

JEL Classification: F15, F21, F31, P2, R13

Suggested Citation

Manzocchi, Stefano and Manzocchi, Stefano and Alcidi, Cinzia, Transition Without Accession. Effects of Differential Integration on Trade and Welfare in a European Perspective (June 2001). CEPS Working Document No. 168, Available at SSRN: https://ssrn.com/abstract=269309 or http://dx.doi.org/10.2139/ssrn.269309

Stefano Manzocchi (Contact Author)

LUISS University ( email )

Viale Romania, 32
Rome, 00197
Italy

Luiss University - Department of Economics and Finance ( email )

Viale Romania, 32
Rome, 00197
Italy

Cinzia Alcidi

CEPS ( email )

1 Place du Congres
Brussels, 1000
Belgium

Graduate Institute of International and Development Studies (IHEID) ( email )

132, Rue de Lausanne
Geneva, 1211
Switzerland

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