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The Political Economy of Regional Integration Projects at Borders where Rich and Poor Meet: The Role of Cross-Border Shopping and Community Sorting

Kristof Dascher () and Alexander Haupt ()

No 2280, CESifo Working Paper Series from CESifo

Abstract: At borders where rich and poor countries meet, services prices differ hugely. In principle, price differentials could be exploited to mutual benefit, offering improved job opportunities to the poor as well as better shopping opportunities to the rich. However, cross-border shopping is often limited by the substantial transaction costs of crossing the border. Moreover, local governments frequently fail to cut these transaction costs even where they have the opportunity to do so. In this paper, we show (i) why a majority of the local electorate often backs this outcome, (ii) how intra-country mobility affects local policy, and (iii) how (inter-) national regulations shape local decisions.

Keywords: cross-border shopping; community sorting; regional integration; voting; federalism (search for similar items in EconPapers)
JEL-codes: D72 F15 H70 R20 (search for similar items in EconPapers)
Date: 2008
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