Economics of the European Integration 2105-EPE-L-D3EEIN

The main goal of the lecture is to provide a comprehensive account of the economics of the European Union. It will contain a blend of basic theory, analysis and description of policies of the EU. Students should have (in principle) a basic knowledge in International Economics. The course will consist of the 30 hours lecture.
 Background Reading: P. Krugman, M. Melitz, M. Obstfeld: International Economics: Theory and Policy, Harper Collins Publishers, Seventh edition, 2017. There is also the polish version of this book: entitled Ekonomia Miedzynardowa, published by PWN 2018.
 Literatura obowiązkowa:
The main textbooks for the lecture are:
• R. Baldwin, Ch. Wyplosz: Economics of European Integration, Mc Graw Hill, 3-rd edition 2019. (Slightly more advanced but very good textbook.
• W. Molle, The Economics of European Integration. Theory, Practice and Policy, Ashgate publishing Company 2019. (There is Polish translation entitled: Ekonomika integracji europejskiej, Fundacja Gospodarcza Gdańsk 2000).
Additional textbooks
• M. Jovanovic, The Economics of International Integration, Edward Elgar, second edition 2015.
• El-Agraa, The European Union. History, Economics and Policies, Prentice Hall, Seventh edition, 2004.
• Routledge Handbook of the Economics of European Integration, eds. Harald Badinger, and Volker Nitsch, 2015

Detailed programme:
Outline of the lecture: Economics of the European Integration
1. Introduction: From the EEC to the EU and main institutions of he Union
• Brief history of the European Communities;
• Subsequent enlargements and Brexit
• Main institutions of EU & decision making process in the EU, Present legal structure of the EU
2. Basic theory of customs union & trade policy of the EU (2 lectures)
• Effects of import tariffs in a small and large country (partial and general equilibrium analysis),
• Static effects of customs union (trade creation, expansion and diversion)
3. elements of dynamic effects: managerial inefficiency, economies of scale, de-monopolization of markets;
4. Single European Market (SEM) in goods:
• Elimination of Technical barriers to trade (TBTs), elimination of border controls, EU standardization policy: early estimates of implications of SEM
5. External trade policy of the EU
• Trade policy of the EU : Common external tariff; quantitative restrictions and other non-tariff measures;
• EU: agreements with neighboring countries and ACP, selected bilateral agreements
6. The Common Agricultural Policy (CAP)
• Goals of the Common Agricultural Policy CAP in 1960’s and 1970’s; specific instruments of CAP: intervention prices, variable import levies, export refunds and production quotas; problem of excess supplies and excessive cost
7. Reforms of CAP
• Financing the CAP and reforms of the CAP: McSharry reforms and Blair House Agreement; reducing prices and introducing direct payments; implications of Eastern enlargement; modulation and degressive direct payments
8. Implications of the free movement of factors of production: The EEC Common Market
• Basic neoclassical theory of factor movements, The economics of Common Market: implications of international movement of factors of production;
• Capital flows: economic implications in partial equilibrium analysis; basic regulations in the EU: company & banking laws, implications of capital flows in Europe,
9. Specificity of imperfect labor markets: implications of Eastern enlargement for European labor flows;
10. Single European Market in services :
• SEM: slow liberalization of services, difficulties in measuring protections in the area of services, Services Directive of 2006, implications of services’ liberalization
11. The new economic geography and agglomeration processes
• Basic concept of New Economic Geography (NEG): economic agglomeration forces: core and peripheral regions,  need for structural polices.
12. The budget of the European Union: structure of expenditures
• evolution of budget expenditures, financing CAP; Increasing role of structural policies; new challenges for budget: after Eastern enlargement and Brexit
13. The economics of monetary integration: European Monetary Union
• Basic elements of Monetary Union: costs and benefits, The European Monetary System: provisions and tensions in operation;
• Long term estimates of Eastern enlargement and convergence, Crisis and future of the Eurozone
14. Measuring the effects of Integration:
• Ex ante analyses based on simulation models
• Ex post analyses: based on trade estimated and synthetic control methods.

Forma zaliczenia:
Students participating in the classes shall have basic knowledge in International Economics. The grading will be based on a written multiple-choice test (about 20), with several open questions.

Teaching effects:

The students will be able to explain what are the sources and implications of the European Economic Integration, in the context of neoclassical and modern trade theories. They will also understand the effects of the functioning of main trade policies of the European Union especially in the context of Central and East European members.