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A Theory of Economic Unions

Author

Listed:
  • Gino Gancia
  • Giacomo A. M. Ponzetto
  • Jaume Ventura
Abstract
After decades of successful growth, economic unions have recently become the focus of heightened political controversy. We argue that this is partly due to the growth of trade between countries that are increasingly dissimilar. We develop a theoretical framework to study the effects on trade, income distribution and welfare of economic unions that differ in size and scope. Our model shows that political support for international unions can grow with their breadth and depth as long as member countries are sufficiently similar. However, differences in economic size and factor endowments can trigger disagreement over the value of unions between and within countries. The model is consistent with some salient features of the process of European integration and statistical evidence from survey data.

Suggested Citation

  • Gino Gancia & Giacomo A. M. Ponzetto & Jaume Ventura, 2019. "A Theory of Economic Unions," NBER Working Papers 26473, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:26473
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    2. Gianmarco Daniele & Amedeo Piolatto & Willem Sas, 2018. "Who Sent You? Strategic Voting, Transfers and Bailouts in a Federation," Working Papers. Serie AD 2018-05, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    3. Rima Rubčinskaitė & Laimutė Urbšienė, 2024. "What matters for the economic synchronization of the Baltic States," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 51(3), pages 645-678, August.
    4. Gianmarco Daniele & Amedeo Piolatto & Willem Sas, 2020. "Does the Winner Take It All? Redistributive Policies and Political Extremism," Working Papers 1157, Barcelona School of Economics.
    5. Gracia-Lázaro, Carlos & Dercole, Fabio & Moreno, Yamir, 2022. "Dynamics of economic unions: An agent-based model to investigate the economic and social drivers of withdrawals," Chaos, Solitons & Fractals, Elsevier, vol. 160(C).
    6. Eisei Ohtaki, 2023. "Optimality in an OLG model with nonsmooth preferences," International Journal of Economic Theory, The International Society for Economic Theory, vol. 19(3), pages 611-659, September.
    7. Jorge SÁ & Ana Lúcia LUÍS, 2022. "Within Economic Blocks, Countries And States Tend To Diverge (Not Converge)," Regional and Sectoral Economic Studies, Euro-American Association of Economic Development, vol. 22(2), pages 37-44.
    8. Kobielarz, Michał L., 2024. "A theory of international unions with exits," Journal of Economic Theory, Elsevier, vol. 215(C).

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    More about this item

    JEL classification:

    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
    • F15 - International Economics - - Trade - - - Economic Integration
    • F55 - International Economics - - International Relations, National Security, and International Political Economy - - - International Institutional Arrangements
    • F62 - International Economics - - Economic Impacts of Globalization - - - Macroeconomic Impacts
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

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