Economic aspects of European Integration
D0M09a
By: Charlotte Blanchez
Professor: Dr. Yannick Bormans
Based on the book - The economics of european integration Seventh Edition and the slides
1
,Chapitre1→History............................................................................................................10
1.Earlypostwarperiod1945-50......................................................................................10
1.1.Death,destructionandupheaval.........................................................................10
1.2.Aclimatforradicalchangeandtheprimequestion.............................................10
1.3.Thebeginningofthecoldwar..............................................................................10
1.4.MarshallPlan........................................................................................................11
2.MakeEuropenotwar:ECSC,EECandEFTA,1951-60...............................................11
2.1.TowardsaneconomicallystrongandrearmedWestGermany............................11
2.2.EuropeanFreetradeassociation(EFTA).............................................................12
2.3.TheFederalismvsintergovernmentalismschism................................................12
2.4.Europeanintegrationgainseconomicmotivations...............................................13
3.Evolutiontwoconcentriccircles....................................................................................13
3.1.Firstenlargement,EEC–EFTAFTAsandthedominoeffectI..............................13
4.Delayedtradeintegration,acceleratedmonetaryintegration:in1970..........................14
4.1.Euro-pessimism1.0:the1970s............................................................................14
5.Deppercirclesandthedominoeffectpart2:Thesinglemarketprogramme..............14
5.1.JacquesDelors....................................................................................................14
5.2.Thesinglesmarketprogramme...........................................................................14
6.ReunitingEastandWestEurope..................................................................................15
6.1.Communism’screepingfailureandspectacularcollapse....................................15
6.2.Firststeps:Theeuropeagreements....................................................................16
6.3.PreparingtheEuforEasternenlargement...........................................................16
7.MonetaryUnion.............................................................................................................16
7.1.Germanunificationandrenewedpushforintegration.........................................16
7.2.Fromratificationdifficultiestotheintroductionoftheeuro...................................17
8.GlobalandEurozonecrisesandinstitutionalresponse................................................17
9.Euroscepticisme2.0......................................................................................................18
10.Brexit...........................................................................................................................18
10.1.Thelong,difficultandmessyBrexitnegotiations...............................................18
11.Thecovid19pandemic...............................................................................................19
12.Theeuropegreendeal................................................................................................19
Chapter2→Facts,Law,InstitutionsandtheBudget.......................................................21
1.EconomicintegrationintheEU.....................................................................................21
2.EUarchitecture.............................................................................................................21
3.EULawThebig5institutions.......................................................................................21
4.Legislativeprocess.......................................................................................................21
5.Someimportantfacts....................................................................................................21
6.Thebudget....................................................................................................................21
Chapitre3→DecisionMaking............................................................................................21
1.Taskallocationandsubsidiarity:EUpracticeandprinciples.........................................21
2.Understandingthetaskallocation:thetheoryoffiscalfederalisme..............................21
3.Economicviewofdecisionmaking...............................................................................21
4.ThedistributionofpoweramongEUmembers.............................................................21
2
, 5.LegitimacyinEUdecisionmaking................................................................................21
Chapter4→Essentialmicroeconomictoolsandtariffanalysis.....................................22
1.Introduction...................................................................................................................22
2.PreliminariesI:supplyanddemanddiagrams..............................................................22
3.Welfareanalysis:consumerandproducersurplus.......................................................22
4.PreliminariesII..............................................................................................................23
4.1.Importdemandcurve...........................................................................................23
4.2.ExportSupplycurve.............................................................................................24
5.MFNtariffanalysis........................................................................................................25
5.1.Welfareeffectsofatariff......................................................................................25
5.2.Tariffsasataxonforeigners................................................................................26
6.Economicjusticeandefficiency....................................................................................26
7.AnalysisofGlobalValueChains(GVCs)......................................................................27
8.Typesofprotection........................................................................................................28
9.Sourcesofcompetitivenessdifferences........................................................................28
10.IntraIndustrytrade......................................................................................................29
Chapter5→Theessentialeconomicsofpreferentialliberalization...............................30
1.Analysisofunilateraldiscriminatoryliberalization.........................................................30
1.1.TheRTAdiagram.................................................................................................30
1.2.Discriminatoryliberalization.................................................................................31
1.3.Supply-switchingeffectsofEECcustomsunion..................................................31
1.4.Welfareeffects.....................................................................................................32
4.1.1.Excurus:Homewelfareeffectsinmoredetail...................................................33
5.Analysisofacustomsunion.........................................................................................33
5.1.Priceandquantityeffects:....................................................................................34
5.2.Welfareeffects.....................................................................................................34
5.3.AnalysisofaCU:welfareeffectsindetail............................................................34
5.4.Customsunisonvsfreetradeagreements..........................................................35
6.Frictionalbarriers:thesinglesmarket...........................................................................35
6.1.PriceandQuantityeffects....................................................................................35
6.2.Welfareeffects.....................................................................................................36
7.“Deep”tradearrangements...........................................................................................36
8.WTORules....................................................................................................................37
Chapter6→Marketsizeandscaleeffects........................................................................38
1.Introduction...................................................................................................................38
1.1.Illustration:Theeffectsofbrexit...........................................................................38
2.Liberalization,defragmentationandindustrialrestructuring.........................................38
2.1.Thelogic...............................................................................................................38
2.2.Empiricalevidence...............................................................................................39
3.TheBE–COMPdiagraminaclosedeconomy.............................................................39
3.1.Theequilibriumprices,outputandfirmsize.........................................................40
4.TheimpactofEuropeanIntegration..............................................................................40
4.1.Welfareeffects.....................................................................................................41
Chapter8→Economicintegration,labourmarketsandmigration................................42
3
, .Europeanlabourmarkets:abriefcharacterization.......................................................42
1
2.Labourmarkets:theprinciples......................................................................................42
2.1.Demand................................................................................................................42
2.2.Supply..................................................................................................................43
2.3.Theequilibriumandunemployment.....................................................................43
2.4.Labormarkets:collectivenegotiations.................................................................44
2.5.LongTermunemployment....................................................................................44
2.6.Cyclicalimpactofwagerigidity............................................................................45
3.Effectsoftradeintegrationonlabourmarkets..............................................................45
3.1.Institutionaleffectsoftradeintegration................................................................45
3.2.SocialDumping....................................................................................................46
4.Migration.......................................................................................................................46
4.1.SomeFacts..........................................................................................................46
4.2.Thesimpleeconomicsoflabourmarketintegration.............................................47
4.3.Broaderinterpretation:complementarityvssubstitutability..................................49
4.4.MigrationandUnemployment..............................................................................49
4.5.Barrierstomobility...............................................................................................50
Chapter9→ThecommonAgriculturepolicy....................................................................51
1.Theoldsimplelogic:pricesupports..............................................................................51
1.1.Thesimpleoldlogic:Thefoodtaxandsubsidyinterpretation.............................52
1.2.Farmsize,efficiencyanddistributionoffarmerbenefits......................................52
1.3.Thesimplelogicof‘payforgoodbehaviour’........................................................53
2.ChangescircumstancesandCAPproblems................................................................54
2.1.ChangedcircumstancesandCAPproblems:budget..........................................55
2.2.ChangedcircumstancesandCAPproblems:farmincome..................................55
2.3.ChangedcircumstancesandCAPproblems:CAPparadox................................55
2.4.ChangedcircumstancesandCAPproblems:Industrializationoffarming...........56
3.ThesimpleeconomiclogicofCAPreform....................................................................56
3.1.Pricecutscompensatedby‘decoupleddirectpayments’....................................57
4.CAPreform&TodaysCAP...........................................................................................57
Chapter10→Locationeffects,economicgeographyandregionalpolicy....................58
1.Europe'seconomicgeography......................................................................................58
1.1.Thefacts..............................................................................................................58
2.Theorypart1:Comparativeadvantages.......................................................................59
3.Theorypart2:Agglomerationandtheneweconomicgeography................................60
3.1.ThelocationaleffectsofEuropeanintegration:asimplemodel...........................60
3.2.ThelocationaleffectsoftighterEuropeanintegration..........................................60
3.3. The locational effects of European integration: considering additional
complicatingfactors....................................................................................................61
4.Theorypart3:Puttingitalltogether..............................................................................61
5.Euregionalpolicy..........................................................................................................62
Chapter11→EUcompetitionandstateaidpolicy...........................................................63
1.Theeconomicsofanticompetitivebehaviorandstateaide.........................................63
1.1.Theeconomicsofanti-competitivebehaviour......................................................63
4
D0M09a
By: Charlotte Blanchez
Professor: Dr. Yannick Bormans
Based on the book - The economics of european integration Seventh Edition and the slides
1
,Chapitre1→History............................................................................................................10
1.Earlypostwarperiod1945-50......................................................................................10
1.1.Death,destructionandupheaval.........................................................................10
1.2.Aclimatforradicalchangeandtheprimequestion.............................................10
1.3.Thebeginningofthecoldwar..............................................................................10
1.4.MarshallPlan........................................................................................................11
2.MakeEuropenotwar:ECSC,EECandEFTA,1951-60...............................................11
2.1.TowardsaneconomicallystrongandrearmedWestGermany............................11
2.2.EuropeanFreetradeassociation(EFTA).............................................................12
2.3.TheFederalismvsintergovernmentalismschism................................................12
2.4.Europeanintegrationgainseconomicmotivations...............................................13
3.Evolutiontwoconcentriccircles....................................................................................13
3.1.Firstenlargement,EEC–EFTAFTAsandthedominoeffectI..............................13
4.Delayedtradeintegration,acceleratedmonetaryintegration:in1970..........................14
4.1.Euro-pessimism1.0:the1970s............................................................................14
5.Deppercirclesandthedominoeffectpart2:Thesinglemarketprogramme..............14
5.1.JacquesDelors....................................................................................................14
5.2.Thesinglesmarketprogramme...........................................................................14
6.ReunitingEastandWestEurope..................................................................................15
6.1.Communism’screepingfailureandspectacularcollapse....................................15
6.2.Firststeps:Theeuropeagreements....................................................................16
6.3.PreparingtheEuforEasternenlargement...........................................................16
7.MonetaryUnion.............................................................................................................16
7.1.Germanunificationandrenewedpushforintegration.........................................16
7.2.Fromratificationdifficultiestotheintroductionoftheeuro...................................17
8.GlobalandEurozonecrisesandinstitutionalresponse................................................17
9.Euroscepticisme2.0......................................................................................................18
10.Brexit...........................................................................................................................18
10.1.Thelong,difficultandmessyBrexitnegotiations...............................................18
11.Thecovid19pandemic...............................................................................................19
12.Theeuropegreendeal................................................................................................19
Chapter2→Facts,Law,InstitutionsandtheBudget.......................................................21
1.EconomicintegrationintheEU.....................................................................................21
2.EUarchitecture.............................................................................................................21
3.EULawThebig5institutions.......................................................................................21
4.Legislativeprocess.......................................................................................................21
5.Someimportantfacts....................................................................................................21
6.Thebudget....................................................................................................................21
Chapitre3→DecisionMaking............................................................................................21
1.Taskallocationandsubsidiarity:EUpracticeandprinciples.........................................21
2.Understandingthetaskallocation:thetheoryoffiscalfederalisme..............................21
3.Economicviewofdecisionmaking...............................................................................21
4.ThedistributionofpoweramongEUmembers.............................................................21
2
, 5.LegitimacyinEUdecisionmaking................................................................................21
Chapter4→Essentialmicroeconomictoolsandtariffanalysis.....................................22
1.Introduction...................................................................................................................22
2.PreliminariesI:supplyanddemanddiagrams..............................................................22
3.Welfareanalysis:consumerandproducersurplus.......................................................22
4.PreliminariesII..............................................................................................................23
4.1.Importdemandcurve...........................................................................................23
4.2.ExportSupplycurve.............................................................................................24
5.MFNtariffanalysis........................................................................................................25
5.1.Welfareeffectsofatariff......................................................................................25
5.2.Tariffsasataxonforeigners................................................................................26
6.Economicjusticeandefficiency....................................................................................26
7.AnalysisofGlobalValueChains(GVCs)......................................................................27
8.Typesofprotection........................................................................................................28
9.Sourcesofcompetitivenessdifferences........................................................................28
10.IntraIndustrytrade......................................................................................................29
Chapter5→Theessentialeconomicsofpreferentialliberalization...............................30
1.Analysisofunilateraldiscriminatoryliberalization.........................................................30
1.1.TheRTAdiagram.................................................................................................30
1.2.Discriminatoryliberalization.................................................................................31
1.3.Supply-switchingeffectsofEECcustomsunion..................................................31
1.4.Welfareeffects.....................................................................................................32
4.1.1.Excurus:Homewelfareeffectsinmoredetail...................................................33
5.Analysisofacustomsunion.........................................................................................33
5.1.Priceandquantityeffects:....................................................................................34
5.2.Welfareeffects.....................................................................................................34
5.3.AnalysisofaCU:welfareeffectsindetail............................................................34
5.4.Customsunisonvsfreetradeagreements..........................................................35
6.Frictionalbarriers:thesinglesmarket...........................................................................35
6.1.PriceandQuantityeffects....................................................................................35
6.2.Welfareeffects.....................................................................................................36
7.“Deep”tradearrangements...........................................................................................36
8.WTORules....................................................................................................................37
Chapter6→Marketsizeandscaleeffects........................................................................38
1.Introduction...................................................................................................................38
1.1.Illustration:Theeffectsofbrexit...........................................................................38
2.Liberalization,defragmentationandindustrialrestructuring.........................................38
2.1.Thelogic...............................................................................................................38
2.2.Empiricalevidence...............................................................................................39
3.TheBE–COMPdiagraminaclosedeconomy.............................................................39
3.1.Theequilibriumprices,outputandfirmsize.........................................................40
4.TheimpactofEuropeanIntegration..............................................................................40
4.1.Welfareeffects.....................................................................................................41
Chapter8→Economicintegration,labourmarketsandmigration................................42
3
, .Europeanlabourmarkets:abriefcharacterization.......................................................42
1
2.Labourmarkets:theprinciples......................................................................................42
2.1.Demand................................................................................................................42
2.2.Supply..................................................................................................................43
2.3.Theequilibriumandunemployment.....................................................................43
2.4.Labormarkets:collectivenegotiations.................................................................44
2.5.LongTermunemployment....................................................................................44
2.6.Cyclicalimpactofwagerigidity............................................................................45
3.Effectsoftradeintegrationonlabourmarkets..............................................................45
3.1.Institutionaleffectsoftradeintegration................................................................45
3.2.SocialDumping....................................................................................................46
4.Migration.......................................................................................................................46
4.1.SomeFacts..........................................................................................................46
4.2.Thesimpleeconomicsoflabourmarketintegration.............................................47
4.3.Broaderinterpretation:complementarityvssubstitutability..................................49
4.4.MigrationandUnemployment..............................................................................49
4.5.Barrierstomobility...............................................................................................50
Chapter9→ThecommonAgriculturepolicy....................................................................51
1.Theoldsimplelogic:pricesupports..............................................................................51
1.1.Thesimpleoldlogic:Thefoodtaxandsubsidyinterpretation.............................52
1.2.Farmsize,efficiencyanddistributionoffarmerbenefits......................................52
1.3.Thesimplelogicof‘payforgoodbehaviour’........................................................53
2.ChangescircumstancesandCAPproblems................................................................54
2.1.ChangedcircumstancesandCAPproblems:budget..........................................55
2.2.ChangedcircumstancesandCAPproblems:farmincome..................................55
2.3.ChangedcircumstancesandCAPproblems:CAPparadox................................55
2.4.ChangedcircumstancesandCAPproblems:Industrializationoffarming...........56
3.ThesimpleeconomiclogicofCAPreform....................................................................56
3.1.Pricecutscompensatedby‘decoupleddirectpayments’....................................57
4.CAPreform&TodaysCAP...........................................................................................57
Chapter10→Locationeffects,economicgeographyandregionalpolicy....................58
1.Europe'seconomicgeography......................................................................................58
1.1.Thefacts..............................................................................................................58
2.Theorypart1:Comparativeadvantages.......................................................................59
3.Theorypart2:Agglomerationandtheneweconomicgeography................................60
3.1.ThelocationaleffectsofEuropeanintegration:asimplemodel...........................60
3.2.ThelocationaleffectsoftighterEuropeanintegration..........................................60
3.3. The locational effects of European integration: considering additional
complicatingfactors....................................................................................................61
4.Theorypart3:Puttingitalltogether..............................................................................61
5.Euregionalpolicy..........................................................................................................62
Chapter11→EUcompetitionandstateaidpolicy...........................................................63
1.Theeconomicsofanticompetitivebehaviorandstateaide.........................................63
1.1.Theeconomicsofanti-competitivebehaviour......................................................63
4
