Theory of Economic Integration 2400-ICU2TEI

----For technical reasons, this version of the syllabus is incomplete. For full syllabus refer to the Faculty website----

The course is designed for students with a solid background in international economic theory.

The specific student learning outcomes and experiences are:
- to understand the development and workings of the EC/EU and other PTAs;
- to become familiar with the key literature on economic integration.

Course outline:

1. Descriptive background (4 h)
What is economic integration
- Definition and significance
- The stages of economic integration
Preferential Trading Areas in world economy
- WTO rules
- Preferential Trade Agreements and the Multilateral Trade System
Basic Principles of EU & Institutions
- Post-War economic integration in Western Europe
- The decision-making institutions of the EU
- The budget of the EU

Main readings
Baldwin and Wyplosz: ch. 1-3
Dyker D. ch. 2, 3, 4
Hiritis T. ch. 1, 2, 4
McDonald F., Dearden S. ch.1, 4
Pelkmans ch. 1-4

2. Product-market integration in a neoclassical world (6h)
- Analysis of discriminatory liberalization
- Analysis of a free trade agreements
- Analysis of a custom union
- Empirical evidence
- Creation and diversion effects in empirical studies
- Estimated Effects of Trading Blocks

Main readings:
Baldwin, Wyplosz., ch. 5
Pelkmans ch. 5-6

3. Market Size and Scale Effects (4h)
"New Trade Theory": Increasing Returns and Imperfect Competition
- Monopoly, international duopoly, and the gains from trade through increasing competition
- Monopolistic competition and the gains from trade through increasing product variety
"New Economic Geography": Externalities and Agglomeration Economies
- The "core-periphery" model
- Welfare effects and multiple locations
- Empirical evidence on location patterns in the European Union
Terms of Trade Effects

Main readings
Baldwin Richard, Charles Wyplosz. ch. 6
Dierx A., Ilzkovitz F., Sekkat K. Ch. 3-5
Dyker ch.9

4. Microeconomics of Factor Market Integration (6h)
- Essential theory
- Single European Market
- Empirical studies
- The 1996 Review of the Single European Market programme
- Evidence of the effects of the SEM since 1996

Main readings
Baldwin Richard, Charles Wyplosz. 2004. ch. 7.4-5
Pelkmans ch. 6.6-7, 9-10
McDonald F., Dearden S. ch. 1
Dyker D. Ch. 5-6
Hitiris ch. 3

5. Macroeconomic issues (4h)
- European Macroeconomic cooperation
- Growth Effects
- Product market reforms and the macroeconomic performance

Main readings
Baldwin Richard, Charles Wyplosz. ch. 7.1-7.3
Dierx A., Ilzkovitz F., Sekkat K. ch. 6-8
Pelkmans ch. 16
Dyker ch.7

6. Monetary integration (6h)
- A Costs of a common currency
- Theory of Optimum Currency Areas
- Costs and benefits compared
- European Monetary System
- European Central Bank
- European Monetary Policy

Main readings
Baldwin & Wyplocz ch. 10, 12, 13, 14
Eijffinger & de Haan ch. 1-3
Artis and Nixson ch. 12
De Grauwe ch 1, 2, 3, 5, 7, 8
Pelkmans ch. 16, 17