The scale of internal market and the growth effects of regional economic integration. The case of the EU
Tomasz Brodzicki
Abstract:
The recent enlargement of the European Union has led to a relatively significant increase in the size of the internal market. This has once again shifted attention to the issue whether the anticipated positive growth effects of economic integration are related to the scale of the integrated market.
In the present study we utilize several empirical approaches to assess whether increases in the scale of the internal market mainly due two a series of enlargements had a positive, distinguishable and statistically significant impact on the real GDP per capita growth rates of the EU Member States. The study is undertaken for a panel of 27 states (EU15 and twelve countries of the reference group) within a considerable period of 40 years (1960-1999). In contrast to the previous research the current study utilizes indices of relative scale of the integrating block in comparison to traditionally utilized absolute scale indices.
The empirical evidence seems to confirm the initial hypothesis. Increases of relative scale of the regional economic block in comparison to the size of domestic economies mainly due to consecutive enlargements seem to provide significant incentives and are beneficial to the growth-performance of the Member States. The incentives are obviously higher for smaller-scale economies. On the policy arena the deepening of the integration process seems to enhance the benefits associated with integration widening.
Keywords: economic growth, European economic integration, scale effects, cross-sectional analysis, dynamic panel data models, system GMM estimator
JEL: F15, F43, C23
