Regionalization and Convergence in the European Union

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Date Published:

Jan 1, 2006

Abstract:

The construction of a European political economy through regional integration is a dramatic social change that raises critical challenges for the study of markets. Does regionalization drive convergence among integrating national economies, or does regionalization deepen existing macroeconomic inequalities? The dominant theoretical approaches are at odds: orthodox economic theory and the political-institutionalist approach to markets predict convergence, whereas world systems theory and its interpretation of integration as exploitation suggest divergence. Economic theory highlights market mechanisms, whereas the political-institutional approach privileges rules and scripts of the new regional social order. Existing evidence on the convergence debate is marked by contradictory findings and a general failure to measure regional integration. This paper reports results from a time series analysis of income dispersion among the 15 countries of the European Union for the 1950-2000 period. The central finding is that regional integration is associated with convergence. The effects of political integration are especially powerful, lending support to the political-institutional approach to regionalization.

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