Piecemeal versus Precipitous Factor Market Integration

Harris Dellas () and Casper de Vries

International Economic Review, 1995, vol. 36, issue 3, 569-82

Abstract: The effects of the speed of international factor markets integration are studied within a general equilibrium, two country model. It is shown that even in the absence of economic frictions there can be no theoretical presumption regarding the 'optimal' speed of integration. The paper identifies plausible conditions under which a precipitous pace leads to permanently lower and a piecemeal to permanently higher levels of income in the integrated economy. The analysis offers a justification based on long-term economic considerations for piecemeal European Community integration practices such as transition periods, admissions phasing out, and for the precipitous German unification. Copyright 1995 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Date: 1995
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