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A Theory Of Economic Disintegration

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  • Eckhard Janeba
  • Karl Schulz
Abstract
We study the impact of unilateral economic disintegration, such as Brexit, on national and international policies. We introduce firm mobility and business‐tax policies into a general‐equilibrium trade model and analyze the effects of disintegration on tax policies of asymmetric countries. Although the disintegrating country taxes less, business taxes converge in the remaining economic area. We highlight important differences with existing two‐country models. Moreover, we predict a realignment of trade policies with a deeper integration inside the union and lower tariffs worldwide. The leaving country's endogenous integration response with other countries may fully compensate for the disintegration‐induced welfare losses.

Suggested Citation

  • Eckhard Janeba & Karl Schulz, 2024. "A Theory Of Economic Disintegration," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 65(1), pages 353-392, February.
    • Handle: RePEc:wly:iecrev:v:65:y:2024:i:1:p:353-392
    DOI: 10.1111/iere.12665
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    Cited by:

    1. Eckhard Janeba & Karl Schulz, 2024. "A Theory Of Economic Disintegration," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 65(1), pages 353-392, February.

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    More about this item

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F15 - International Economics - - Trade - - - Economic Integration
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • F53 - International Economics - - International Relations, National Security, and International Political Economy - - - International Agreements and Observance; International Organizations
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects

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