NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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A Theory of Economic Unions

Gino Gancia, Giacomo A. M. Ponzetto, Jaume Ventura

NBER Working Paper No. 26473
Issued in November 2019
NBER Program(s):International Finance and Macroeconomics Program, International Trade and Investment Program, Political Economy Program

After decades of successful growth, economic unions have recently become the focus of heightened political controversy. We argue that this is partly due to the growth of trade between countries that are increasingly dissimilar. We develop a theoretical framework to study the effects on trade, income distribution and welfare of economic unions that differ in size and scope. Our model shows that political support for international unions can grow with their breadth and depth as long as member countries are sufficiently similar. However, differences in economic size and factor endowments can trigger disagreement over the value of unions between and within countries. The model is consistent with some salient features of the process of European integration and statistical evidence from survey data.

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Document Object Identifier (DOI): 10.3386/w26473

Published: Gino Gancia & Giacomo A.M. Ponzetto & Jaume Ventura, 2019. "A Theory of Economic Unions," Journal of Monetary Economics, .

 
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