Category — EC4333

In this lecture, we will introduce students to the institutional, legal and political context of enlargement within the EU, and preview and examine the fifth enlargement’s likely effects. We will examine the preconditions for reform, and develop a simple model of development, trade policy, and mobility.

Over the weeks we’ve seen a series of increasingly analytical approaches to exploring European integration. This week we’ll look at putting two approaches together: a descriptive, political economy framework for describing the system as a whole, and an analytical model describing the potential effects of trade policy on integration for the accession countries.

In May 2004, 10 new countries joined the EU, and Bulgaria and Romania became members in 2007. Croatia, Turkey and Macedonia are candidate countries. The EU is considering the possibility of further enlargements to countries in the Western Balkans, which could eventually include Bosnia & Herzegovina, Serbia, Kosovo, Montenegro and Albania.  

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The ongoing EU enlargement process raises fundamental questions about the future of the Union. Will expanding membership lead to a change in identity of the EU? Is widening on this scale compatible with deepening? Will the EU be condemned to endless arguing about the relative size of contributions to and receipts from the Community budget? Will an expanded membership require fundamental changes in EU economic and cohesion policy and the Common Agricultural Policy after 2013 (when a new financial perspective begins)?  Will the Lisbon Treaty be ratified, and will it provide the EU with an institutional framework that enables it to avoid deadlock in decision-making, and at the same time increase its transparency and democratic accountability? The EU is committed to further enlargements, but where should its borders end?

Lecture Slides

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Handout. (Right click to download)

Further Reading/Viewing

Antonis Adam and Thomas Moutos, The Political Economy of EU Enlargement: Or, Why Japan is not a Candidate Country?

Friedrich Heinemann, The political economy of EU enlargement and the Treaty of Nice

Baldwin, Richard, Joe Francois, and Richard Portes, 1997, The costs and benefits of EU enlargement to the East, Economic Policy 24, 125-176,

(You must be in college to download these papers)

Catherine Drew and Dhananjayan Sriskandarajah, EU Enlargement in 2007: No Warm Welcome for Labor Migrants

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EC4333 Students should find this interesting:

Nice one.

Embedded Video

Blogged with Flock

Click here to download the Problem Sheet

Here is the Solow spreadsheet to use in question 1. Click here to download it.

Instructions

• This problem set is worth 15\% of your final grade.
• Work in groups, but hand in your own work.
• Submit your work via email to neal.kilbane@ul.ie, and in hardcopy to the departmental office, KB 3-22a, by Monday November 24th at 4pm.
• Call the file you send Neal yourname_yourstudentnubmer_EC4333_ProblemSet3.doc.
• Label the hardcopy of your work with your name and student number.

Related articles

• Economics of European Integration Problem Set 1

Tuppenceworth is liveblogging the Oireachtas meeting on Ireland’s future in the EU.

EC4333 students should check it out here.

(HT, Slugger O’Toole)

We have seen how the EU has affected economic growth and development across the EU in previous lectures. In this lecture, we will examine how the EU affects the social fabric of its constituent societies, through a series of cohesion funds. We will look at the definitions of inequality in the economics literature, develop some tools to measure this inequality, and expose these tools to available data.

The origins of EU social policy can be found in all three of the original treaties founding the European Communities. Article 46 of the Treaty of Paris establishing the European Coal and Steel Community refers to the improvement of the living and working standards of workers in the coal and steel industries. The Euratom Treaty sets out provisions for the health and safety of workers in the civilian atomic energy industry. By far the most extensive treatment of social policy is to be found in the Treaty of Rome, which refers to:

• Free movement of workers (Articles 48–51);
• Improvement in working conditions and in standards of living (Articles 117–128);
• Equal opportunities for men and women (see Box 14.1) (Article 119); and
• The creation of the European Social Fund (Article 123).

In this lecture, I aim

• To examine the role of the social cohesion funds in the development of economic integration
• To discuss their history and potential economic effects and affects.
• To develop the Gini coefficients and Lorenz curves for individual countries and discuss the role of income distribution and redistribution

Activity

Students will construct a hypothetical Lorenz curve in class.

Michie, J., `Unemployment in Europe’, in Amin and Tomaney, eds. Behind the Myth of European Union: Prospects for Cohesion}, Routledge Press, 1995, pgs. 51–82. 337.14 AMI.

Watch the Lecture

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Download the Handout

Just click the image below.

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• Economics of EU Integration Lecture 8: Industrial Policies in the EU
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• The Gini Coefficient
• http://en.wikipedia.org/wiki/Gini_coefficient
• http://people.hofstra.edu/geotrans/eng/ch4en/meth4en/gini.html

EC4333 students, take a look at the page I’m linking to here, it’s very important for the course.

European Commission - Economic and Financial Affairs - Economic Forecast autumn 2008: growth comes to a standstill in the wake of the financial crisis

Competition policy was developed as an essential part of the integration process, both in the Treaty of Paris, establishing the European Coal and Steel Community, and in the Treaty of Rome. Competition policy is aimed at preventing distortions in competition caused either by private firms, or by government actions. EU competition policy is complementary to national measures, but in cases of conflict EU competition law prevails.

Central to the analysis of the likely benefits of integration are the cost and price reductions that were expected to accrue.
There is a risk that restrictive practices between otherwise independent firms, or the behaviour of dominant (or monopoly) firms, might prevent these price reductions from being realized. Integration is also expected to lead to increased competition, and to meet these additional pressures firms might be induced to form cartels or undertake mergers in order to reach dominant market positions. National governments may be tempted to help their firms face the additional competitive pressures by granting them state aids.
To prevent such developments undermining competition, EU policy therefore covers:

■ Antitrust measures, or the fight against cartels and restrictive practices (Article 81) and against dominant position (Article 82);

■ Mergers (Reg. 4064/89 of 1989); and

■ State aids and regulated industries (Articles 86–88).

To prepare for EU enlargement, the EU introduced new rules on competition policy from 1 May 2004.

We’ll spend the lecture talking about these new rules and discussing how the simple monopoly/perfect competition model can be adapted to allow us to understand cartelisation and industrial policy.

You can watch the lecture below and download the slides, and there will be a podcast after the lecture.

| View | Upload your own

Download the handout by clicking the image below.

There’s a box outside the departmental office, KB 3 -22a, for your assignments, and it will be there on Monday from 9am-4pm.

From calculated risk via Delong. 

The Common Agricultural Policy is a source of much contention in Europe and in the world because of its size, budgetary implications, and redistributive effects. It was a key feature of the recent Doha Development Round of trade talks. Read more about the CAP by downloading this .pdf from the EU. Here is an excellent Q & A session by the BBC about the CAP. 

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In this lecture, we talked about the history of the CAP, its current status, and looked at a measure of just how much individuals are getting from the CAP in places like Limerick and Dublin using farmsubsidy.org. Most of you felt that individual farmers shouldn’t have their names made public. I disagreed, but 5 of you changed your minds on the issue, so that’s something :) 

Right click this link to download the handout.

EC4333 students, click here to read an article describing the Lisbon treaty’s possible effects on energy security in the EU. From the article: 

A wider and deeper understanding of this state of affairs on the part of the citizens of Europe and their respective member states and the urgent need for the EU to address this mutually volatile state of affairs is long overdue.

Without ratification of the Lisbon Treaty, the EU does not have the necessary institutional and policy competences to do this effectively. This lack of competence threatens both energy security and greater stability in the geopolitical system in terms of stable relations with Russia and, more generally, the stability of the international political system as a whole.

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In the last lecture we looked at optimal currency area theory and the evidence to support the hypothesis the EU was one. We found something rather different, but still interesting. We have now almost finished the ‘theory’ part of the course, and are beginning to get down to the real nuts and bolts of the EU, beginning with the Common Agricultural Policy next week. But before we do so, we’ll make a brief detour into the theory of economic growth and convergence, to see where we might all be headed. Click below to download the handout, grab the slides to write, or watch the slides online. Obviously the lecture will be broadcast afterward.

Lecture6_Handout

Lecture 6 Slides

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Introduction

In this lecture, I’ll show you several of the costs of joining an EMU, after recapping on the benefits. These costs are all linked around the idea of a loss of potential flexibility in response to a crisis, much like the one we’re in right now.

How labour markets react to changes in demand for services, or how currencies are effected when devaluations are not possible, is a secondary concern of this lecture. We’ll look at the costs again, very briefly, and develop the criteria for an Optimal Currency Area (OCA) to form. We’ll present evidence that the EU almost certainly is NOT an OCA, and discuss reasons for this. Finally, we’ll talk about Germany, France, and Ireland’s bailout of the banks, and discuss why this was a good idea done for the wrong reason.

Further Reading

Hansen, J.D., European Integration: An Economic Perspective, Oxford University Press, 2001, 1st ed. pgs. 163-189, 337.142 DRU.

Click here to read Mundell’s original 1961 article on OCAs. You must be on the college network to read this.

Slides & Handout

Click below to watch the slideshow.

Download the handout by right clicking the image below and choosing ’save target as’.

Introduction

In this lecture, I’ll show you several of the costs of joining an EMU, after recapping on the benefits. These costs are all linked around the idea of a loss of potential flexibility in response to a crisis, much like the one we’re in right now.

How labour markets react to changes in demand for services, or how currencies are effected when devaluations are not possible, is a secondary concern of this lecture. We’ll look at the costs again, very briefly, and develop the criteria for an Optimal Currency Area (OCA) to form. We’ll present evidence that the EU almost certainly is NOT an OCA, and discuss reasons for this. Finally, we’ll talk about Germany, France, and Ireland’s bailout of the banks, and discuss why this was a good idea done for the wrong reason.

Further Reading

Hansen, J.D., European Integration: An Economic Perspective, Oxford University Press, 2001, 1st ed. pgs. 163-189, 337.142 DRU.

Click here to read Mundell’s original 1961 article on OCAs. You must be on the college network to read this.

Slides & Handout

Click below to watch the slideshow.

Download the handout by right clicking the image below and choosing ’save target as’.

Wikipedia is a great resource, and I use it everyday. Economics of European integration students have no doubt been running to it in search of different definitions and historical facts. Several student have emailed me today asking if it’s OK to reference wikipedia articles in their essays. My answer is a very cautious yes.

Here’s why.

Wikipedia should be the first port of call when researching a topic; not the last. So when looking for Trade Creation, use the wikipedia page to find the basic references, and then go there and search further. Don’t stop at wikipedia.

So when it is OK to directly reference wikipedia? When you take a direct quote or a diagram from there. Even then, be sparing. Your objective in the essay is to show me you understand some of the nuances of European economic history as they apply to the models we’ve seen in class and the Lisbon treaty.

You’re going to have a hard time convincing me  of this if all I see are wikipedia links.

So: use wikipedia, but as the gateway to other, deeper material, not as the final destination.

EC4333 students who wish to use the anti-plagiarism software turnitin should click here and register to get access to the course page for the website.The course is called Economics of European Integration, and the assignment is called ‘essay’.

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The last two lectures (watch them here and here) looked at the history and structure of the EU up to the Lisbon Treaty. We also began talking about trade creation and trade destruction. The purpose of this lecture is first, to finish off the theory of trade, and look at some data regarding trade integration in the EU over time, and second, to begin talking about monetary union.

Click below for lecture notes, handouts, links, and slides. A podcast will be available after the lecture.

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Click here to find out. 

Now ask yourself: how likely is it you’ll make this much per year? What would you need to do to make this figure every year?

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EC4333, Economics of European Integration

Module Outline, Autumn 2008

Lecturer Dr. Stephen Kinsella

stephen.kinsella@ul.ie, office hours by appointment only.

TA Neal Kilbane

neal.kilbane@ul.ie, office hours TBA.

Prerequisites EC4001, EC4002, or permission of the instructor.

ECTS Credits: 6

Introduction The years since 1945 have been the longest period since 113 B.C. in which no army has crossed the Rhine with war-like intentions. The very idea of war between the European Union’s member States seems so remote as to be nonsensical. The creation of the European Union (EU); a legal, political, economic, cultural, and soon to be military entity, is one of the greatest economic experiments in the history of Mankind. The shape and scope of the EU has the capacity to affect the lives of hundreds of millions of people in different ways, some positive, some negative. Thus a careful study of this experiment is in order.

This module is about using economics to understand the history of the EU, its significance in terms of the post 1945 World Economy, its development up to today, and the prospects for change most likely in the future. We have 24 contact hours. Each 2 hour block will be thematic, that is to say, this is not a survey module in International Economics or naive Trade theory. Rather, this module will focus on developing the appropriate models and conceptual frameworks to understand a particular issue facing the EU today. The objective of the module is to inform potential future policy makers of the issues at stake and equip them with the tools to analyze these issues.

Learning Outcomes By the end of this module, students should be

1. conversant with the historical literature on the development of the EU having written several thousand words on the subject;

2. understand transaction-cost analysis, institutional analysis, optimal currency area theory and simple models of capital and labour market integration and be able to apply these theories to current practice following the problem sets given in class;

3. conversant with the Solow model of economic growth, theory and practice of covergence, and able to assess the empirical reality of these claims;

4. knowledgeable about EU social and environmental policy and their impact on the Irish economy.

Click below to read the details of this module.

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