A Theory of Economic Disintegration

Eckhard Janeba and Karl Schulz

No 8706, CESifo Working Paper Series from CESifo

Abstract: We develop a theory of economic disintegration with both endogenously formed tax and trade policies. We show very generally that, contrary to conventional wisdom, a country’s disintegration from an integrated area leads to a deeper integration inside the area. Similarly, the departure of a country from a customs union lowers tariffs world-wide. Moreover, we introduce international firm mobility and non-cooperative business tax policies into the multi-country, multi-sector general equilibrium trade model of Melitz and Ottaviano (2008). We address the model-inherent dimensions of economic disintegration, such as tariffs, non-tariff barriers, the harmonization of production standards and regulations, business frictions, as well as household migration and analyze their effects on the domestic tax policies of asymmetric countries.

Keywords: trade policy; tax/subsidy competition; oligopolistic markets; economic integration (search for similar items in EconPapers)
JEL-codes: F13 F15 F22 F53 H25 H73 (search for similar items in EconPapers)
Date: 2020
New Economics Papers: this item is included in nep-int
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Related works:
Journal Article: A THEORY OF ECONOMIC DISINTEGRATION (2024)
Working Paper: A Theory of Economic Disintegration (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_8706

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