Theory of Economic Integration 4003-114TIE
The aim of this 15-hour lecture is to present the fundamental elements of the theory of economic integration in the context of the European Union. The course begins with an analysis of trade effects. First, the teacher will present the classical statistical trade effects, followed by the dynamic allocation effects related to the occurrence of the economies of scale, overcoming monopolistic structures and increasing managerial effectiveness. The above discussion will provide the foundation for analysing specific instruments of trade policy applied in the European Union, followed by analysis of the theoretical premises and effects of liberalisation of the movement of human and financial capital. The teacher will also present the main regulations concerning free movement of the factors of production in the European Union. Issues connected with the functioning of the Common Agricultural Policy and the monetary union will be discussed separately. The above discussion will provide the foundation for analysing specific instruments of trade policy applied in the European Union.
After discussing the principles and effects of integration under the Common Agricultural Policy, the teacher will present the effects of the establishment of the common market. After the neoclassical analysis of the effects of mobility of the factors of production, the teacher will present the effects of integration of the labour market in the conditions of incomplete employment as well as discuss the effects of liberalisation of the capital market in the conditions of residual restrictions to capital flow. At the end of the course, the teacher will present selected estimates of the consequences of European integration after the enlargement to include the countries of Central and Eastern Europe. Issues related to the monetary union will only be broadly outlined, they are the subject of a separate lecture.
Issues to be discussed during the lecture:
1. Theory of customs unions and free trade areas:
a. Statistical analysis of trade effects (the effect of creation and shifting of trade), analysis under partial and general equilibrium
– the distribution of gains depending on the trade policy applied;
b. Dynamic (long-term) effects of a customs union:
– economies of scale (partial analysis depending on the initial structure of production)
– increase of competition and technological progress
– increasing managerial effectiveness
2. External trade policy and the common agricultural market:
a. External trade policy: protectionism: anti-dumping and anti-subvention policy and safeguard clauses
b. Common agricultural market
Specific instruments of agricultural policy
– organisation of the market: internal prices vs. protection levels
– specific instruments of the common agricultural policy: a comparison of the effects of tariffs, export subventions, price guarantees, import quotas, production quotas
3. Theory of the common market:
a. Traditional neo-classical analysis of the movement of the factors of production in the conditions of perfectly functioning markets (distribution of gains)
b. Analysis of the labour market in the conditions of incomplete employment and the existence of barriers to the movement of factors
c. Benefits from the integration of capital markets
4. Elements of the theory of the monetary union and sample empirical studies of the effects of trade integration:
– Optimum currency area,
– Benefits and costs of establishing a monetary union
– The Armington model
– European Commission estimates based on general equilibrium models by Baldwin, Francois, Portes, Ormowski and UKIE.
Student's workload:
lecture - 15 h
preparation to the lecture - 30 h
preparation to the exam - 45 h
total - 90 h
Type of course
Mode
Learning outcomes
Students after completing this lecture should be familiar with:
Key elements of the neoclassical and modern customs union theory, the elements of economic implications of capital and labor mobility, the elements of optimal currency area (OCA) theory and EMU convergence criteria.
Students should understand the costs and benefits arising from the membership in the customs union, common market and monetary union
Students shall be ready to discuss the topics related to costs and benefits from the participation of Poland in the EU, and especially in the Eurozone. They should be able to discuss the issues related to the entrance and exit of the countries to the EU and monetary union.
Assessment criteria
The basis for the graduation is the written exam at the end of the lecture. It consists of 20 multiple choice questions and 1-2 open questions. In addition there is premium for regular attendance at the lecture; up to 15 percent of the number of points at the examination.
Bibliography
Literature in Polish:
- W. Molle: Ekonomika integracji europejskiej, Fundacja gospodarcza, Gdańsk 2000
- S. Ładyka, Z teorii integracji gospodarczej, SGH, Warszawa, 2000.
- M. Tracy, Polityka rolno-żywnościowa w gospodarce rynkowej, Wprowadzenie do teorii i praktyki, Olympus, Warszawa 1997.
- W. Orłowski, Koszty i korzyści z członkostwa Polski w Unii Europejskiej. Metody, modele, szacunki. CASE, Warszawa, 2000.
- Konsekwencje realizacji III etapu unii gospodarczej i walutowej dla Polski dla Polski, IKC 1998
Literature in English:
- European Economic Integration, (red.: F. McDonald, D. Dearden), Longman 1999.
- A. El-Agraa: The European Union, History, Institutions, Economics and Politics. Prentice Hall 1998.
- M. Artis, N. Lee (red.) The Economics of the European Union, Oxford University Press, 1998.
- T. Hitris, European Union Economics, Prentice Hall, 1998.
- The European Economy (red. D. Dyker), Longman 1999.
- R. Baldwin, J. Francois, R. Portes: The costs and benefits of eastern enlargement, Economic Policy, 224, 1997
- Trade Blocks, A World Bank Policy Research Paper, World Bank 2000.
- A. Mayhew, Recreating Europe: The EU's Policy towards Central and Eastern Europe, Cambridge 1998.ge 1998.
Additional information
Information on level of this course, year of study and semester when the course unit is delivered, types and amount of class hours - can be found in course structure diagrams of apropriate study programmes. This course is related to the following study programmes:
Additional information (registration calendar, class conductors, localization and schedules of classes), might be available in the USOSweb system: