A Theory of Economic Unions

46 Pages Posted: 4 Dec 2019

See all articles by Gino Gancia

Gino Gancia

Queen Mary University of London; Universitat Pompeu Fabra - Centre de Recerca en Economia Internacional (CREI)

Giacomo A. M. Ponzetto

CREI - Universitat Pompeu Fabra

Jaume Ventura

Universitat Pompeu Fabra - Centre de Recerca en Economia Internacional (CREI)

Multiple version iconThere are 2 versions of this paper

Date Written: November 2019

Abstract

After decades of successful growth, economic unions have recently become the focus of heightened political controversy. We argue that this is partly due to the growth of trade between countries that are increasingly dissimilar. We develop a theoretical framework to study the effects on trade, income distribution and welfare of economic unions that differ in size and scope. Our model shows that political support for international unions can grow with their breadth and depth as long as member countries are sufficiently similar. However, differences in economic size and factor endowments can trigger disagreement over the value of unions between and within countries. The model is consistent with some salient features of the process of European integration and statistical evidence from survey data.

Keywords: Economic unions, European integration, non-tariff barriers

JEL Classification: D71, F15, F55, F62, H77

Suggested Citation

Gancia, Gino and Ponzetto, Giacomo A. M. and Ventura, Jaume, A Theory of Economic Unions (November 2019). CEPR Discussion Paper No. DP14121, Available at SSRN: https://ssrn.com/abstract=3496610

Gino Gancia (Contact Author)

Queen Mary University of London ( email )

Mile End Road
London, London E1 4NS
United Kingdom

Universitat Pompeu Fabra - Centre de Recerca en Economia Internacional (CREI) ( email )

Ramon Trias Fargas, 25-27
Barcelona, 08005
Spain

Giacomo A. M. Ponzetto

CREI - Universitat Pompeu Fabra ( email )

Ramon Trias Fargas, 25-27
Barcelona, 08005
Spain
+34 93 542 2829 (Phone)
+34 93 542 2826 (Fax)

HOME PAGE: http://www.crei.cat/people/ponzetto

Jaume Ventura

Universitat Pompeu Fabra - Centre de Recerca en Economia Internacional (CREI) ( email )

Ramon Trias Fargas, 25-27
Barcelona, 08005
Spain

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