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A Theory of Economic Unions

Gino Gancia (), Giacomo Ponzetto () and Jaume Ventura

No 1110, Working Papers from Barcelona Graduate School of Economics

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 ad 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 same salient features of the process of European integration and statistical evidence from survey data.

Keywords: economic unions; non-tariff barriers; European integration (search for similar items in EconPapers)
JEL-codes: F15 F55 F62 H77 D71 D78 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-int and nep-ore
Date: 2019-09
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