Browsing by Subject "economic integration"

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  • Koivistoinen, Sari (2006)
    This thesis concentrates on a concept of convergence, and thus it examines whether reduction of disparities between poor and rich countries is taking place and what are the most important factors contributing to such process. The main focus is on a group of more homogenous countries, namely the countries of the European Union due to its ongoing process of convergence and enlargement. Besides the theoretical analysis on convergence, some empirical evidence and analysis of whether trade liberalization has enhanced the convergence process is presented. The thesis discusses the enlargement of the EU and its effects on convergence, but also the history of convergence within the European countries. Sigma-convergence within the enlarged EU area has taken place during the examination period of 1993-2004, and therefore income disparities between countries appear to be declining. When analysing beta-convergence during the period, a negative relationship between the initial level of GDP per capita and its average growth rate can be found. As predicted by the neoclassical theory of convergence, the EU-10 countries are among the initially poorest and fastest growing countries, and the EU-15 countries have a slower growth rate. According to the estimation, the countries of the European Union converge in an absolute sense at a speed of 2.1 % per year. The results indicate that the expected duration of the convergence process must be measured in decades. When examining the relationship between sigma-convergence and economic integration, the liberalisation of trade was found to have an impact on convergence within the EEC. Also among the EU-15 is found evidence for that mutual trade is rather good indicator of sigma-convergence. As for the new member states of the EU, there is a positive relationship between the volume of trade and the degree of openness. Trade between the EU-25 countries has accelerated, which exhibits a propensity towards convergence. The most important references used are Barro, Robert J. and Sala-I-Martin, Xavier (1995), Sala-I-Martin, Xavier (1996) and Kaitila, Ville (2004) for the concept of convergence, Economic and Social Data Service dataset for empirical evidence, and Ben-David, Dan and Kimhi, Ayal (2004) for the relationship between trade and convergence.
  • Carlson, Mari (Helsingfors universitet, 2016)
    Economic integration refers to the theoretical background which is based on the functioning of regional trade agree-ments (RTAs). Trade in context of economic integration embodies special characteristics in comparison to classical free trade. The special characteristics are contested whether they are welfare enhancing or diverting. RTAs are trade agree-ments between two or more countries and their number has been increasing during the last decades. Such agreements play an important role in international agro-food trade as already over 50% of agricultural products are traded within or between RTAs. The increase in number of RTAs and wider inclusion of agricultural trade in these agreements have revealed new agricultural trade policy measures which distort trade in agro-food products. These are so called non-tariff measures of which this study focuses on sanitary and phytosanitary (SPS) measures. The legitimate intention of such measures is to protect plant, animal and human health and prevent the spreading of harmful pathogens through international trade. This study attempted to create a theoretical framework for analysis of trade effects caused by SPS measures. The ef-fects were found to depend first of all on the burden of compliance and the nature of a SPS measure. Burden of com-pliance was divided into three dimensions of specific, uniform or universal measures according to whom the costs are due. For the nature of the SPS measures three categories were identified: cost-increasing, quantity-restricting and combining SPS measures. The developed theoretical framework was applied to analyze the case of poultry meat trade between the EU and the US in a case where the SPS measure becomes ineffective. The SPS measure of pathogen reduction treatments (PRTs) applied by the EU was identified as a combining measure. After having analyzed the trade effects in partial equilibrium framework, the changes in economic welfare for the EU poultry meat market were quanti-fied. The quantification of the economic welfare measures was made by using partial equilibrium comparative static analysis combined with Marshallian economic surplus framework. Economic surplus measures were calculated by comparing the initial welfare levels with the corresponding levels after the policy change. The analysis concentrated on short-term effects and the base year used was 2013. The calculations proceeded by defining supply and demand equations to calculate equilibrium price and quantity in the present policy regime which enabled calculations of consumer and pro-ducer surpluses. Then, the new trade policy regime was introduced by manipulating producer price. Equations defined in the first stage were used to calculate new quantities for production and consumption in the EU. Then, consumer and producer surpluses were calculated in the new trade policy regime. Finally the obtained results were compared with each other. The results of the welfare analysis show that the SPS measure concerning the use of PRTs in poultry meat has impact on producer and consumer welfare in the EU. Consumer welfare increased after the SPS measure became ineffective. The explanation is the decrease in price which lead to increase in consumption. However, producer welfare decreased as a consequence of lower price. The production of poultry meat decreased which meant that the gap between the EU production and consumption increased. This indicated that the import demand for poultry meat increased for the EU. If the imports were not restricted from the US, consumers would be able to obtain the higher welfare level than before the change in policy regime.
  • Riihimäki, Elisa (2003)
    This study analyzes the effects of the economic integration on the elasticities of labour demand. We present a linear model of intra-industry trade considering how product market integration affects labour demand. For traded goods, there is firm in each country producing with two factors of production, labour and capital, and non-traded goods are produced only with labour. In a Cournot-Nash equilibrium, we show that the various channels of integration have different effects on labour demand. A decrease in trade barriers tends to increase labour demand. However, if product market integration gives rise to an increase in the number of traded goods, we can expect labour demand to decrease. The reason behind these counteracting results is that taking better advantage of economies of scale firms expand production despite lower price-cost margins, while firms face an increase in the degree of competition in goods markets. In a non-linear model, the purpose is to analyze how economic integration changes in theory the labour-demand elasticity with own price. We suppose that, in an open economy, industries produce goods with capital and labour. We derive two different effects of an increase in the degree of integration, a scale effect and a substitution effect, on the labour-demand elasticity. If integration gives rise to an increase in substitutability, we can expect labour demand to become more elastic. We show also that international trade increases the elasticity of labour demand by increasing the elasticity of product demand. Then, integration makes labour demand more elastic either by making output markets more competitive or by making domestic labour more substitutable with foreign factors. We present a two-stage estimation model in which the aim is to investigate empirical whether integration within European Union has changed the labour-demand elasticities with own price in Finland using data from the manufacturing sector from 1975 to 1999. The more elastic labour demand is, the more sensitive employment in consequence of the change of labour costs changes. We find that the labour demand became more elastic over process of integration in manufacturing overall and in all sectors by using instrumental variables estimation, and by using ordinary least squares in manufacturing overall and in the majority of the sectors. We find also that the effects of the demand shocks on labour demand have become greater in all sectors except one. Determining European integration’s effect on the labour-demand elasticities, our second stage results provide some support for the hypothesis that integration has contributed to increase in labour-demand elasticities. The majority of the integration indicators have the predicted effect on the elasticities for manufacturing overall and for the majority of the sectors. The results provide also some evidence that the integration forces changing labour substitutability by making labour more easily substituted for foreign factors of production.
  • Heinonen,Hannu (2001)
    The thesis studies the possibilities of regional integration in the Southern African Development Community (SADC). The aim is to view the viability of the integration strategy chosen by SADC. The starting point of the theoretical framework is the traditional theories of economical integration, which do not give much hope for succesful economic integration among developing countries. Certain qualifications have been made to these traditional market integration theories, which would enable their use also in the context of developing countries. Special emphasis is given to an integration strategy called development integration model, because it is the strategy that SADC claims that it is pursuing. The development integration model emphasises the equal distribution of benefits among the members of a regional grouping. This problem can be tackled with so-called corrective mechanisms. Establishment of those mechanisms depend largely on the attitude of member countries, and especially on the leading countries that bear the economical burden of the costs. In the empirical analysis it is seen that the current economical situation and trade patterns in Southern Africa do not favour integration according to the traditional models. Most of the economical benefits will concentrate to South Africa when a SADC free trade area will be formed. At the same time the less-developed members of the region could end up economically even worse-off than at the moment. This problem can be solved only with the corrective mechanisms. The success of establishing the corrective mechanisms and the whole development integration model depends largely on the future role of South Africa. The theoretical material of the work consists mainly of the traditional integration theories, but also of the more recent studies on the regionalization in Southern Africa mainly by Bertil Odèn. The empirical analysis is mainly based on the official statistics of SADC countries, but also on other academic research and official publications of SADC.
  • Gangnuss, Danila (2005)
    The European Union has created a massive market for goods, services, capital and labour. In principle, goods and services as well as factors of production can move freely across the national borders within the European Union. Migration of the factors of production is driven by the country-specific differences in marginal productivity. As a result of this, migration ensures the most efficient use of the factors of production and therefore promotes the general welfare. However, international mobility of the factors of production might threaten national welfare of the countries that participate in economic integration. For some of the countries, this raises concerns about loosing factors of production in favor of the other member-states of the European Union. The purpose of this thesis is to analyze how mobility of skilled labour affects income taxation decisions in the countries that face economic integration. The thesis identifies optimal patterns of taxes and of public expenditures in the countries that face international agglomeration of industry. It poses the question of whether there exists an optimal size of the public sector in the presence of economic integration. Starting with the core-periphery models of Krugman (1991a), Fujita et al. (1999) and Forslid (1999), the thesis considers a new economic geography model of tax competition (Andersson and Forslid 2001), where two initially identical countries compete for internationally mobile skilled workers. The model contains two types of equilibria. In the dispersed equilibrium, manufactured production and skilled workers are located in both countries. In the agglomerated equilibrium, manufactured production and skilled workers are concentrated in one of the countries. For both types of equilibrium we construct taxes, which are optimal for the purpose of preserving current distribution of manufactured production and of skilled workers. We show that it is always optimal to tax the income of skilled workers at some positive rate. In the dispersed equilibrium, taxes on the income of skilled workers cannot be increased above some critical level without producing agglomeration of industry. However, in the agglomerated equilibrium, economic integration decreases sensitivity of skilled workers with respect to fiscal incentives. As a result of this, the scope for income taxation of skilled workers in the agglomerated equilibrium does not monotonically decline with trade costs. We also show that taxes on the income of unskilled workers determine the size of the public sector in the dispersed equilibrium but not in the agglomerated equilibrium. It is interesting that in the country, which contains agglomeration of industry, taxes on the income of unskilled workers can be decreased without reducing the size of the public sector.