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Growth and Development in the Global Economy

Edited by Harry Bloch

What are the forces behind the increasing globalization of economic life? How does globalization affect the functioning of national economies? What difficulties confront government policymakers in dealing with the global economy? These issues are addressed in this volume by leading specialists. The contributors present a range of unique and varied perspectives from which they consider aspects of the increasing integration of economic life, exploring implications for the functioning of domestic markets in a rapidly changing global economy. The result is a collection of insights that provide a framework for understanding globalization as an economic phenomenon.
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Chapter 4: Production Externalities, Integration and Growth: The Case of the European Union ‘Single Market’

Jeffrey P. Cohen and Catherine J. Morrison Paul


Jeffrey P. Cohen and Catherine J. Morrison Paul INTRODUCTION Increased openness or integration among nations is generally regarded as having growth-enhancing effects. The European Union is a particularly interesting case for which evidence of such a hypothesis might be sought, due to its expanding linkages over time. The European Union (EU) of today is the result of a process of cooperation and integration that began in 1951 between six countries: Belgium, Germany, France, Italy, Luxembourg and the Netherlands. Four sets of accessions, in 1973, 1981, 1985 and 1995 have expanded this base to encompass 15 countries, with the addition of Denmark, Ireland, the UK, Greece, Spain, Portugal, Austria, Finland and Sweden. These fifteen member states expanded their economic integration with the establishment of a ‘single market’ in 1993; monetary integration was launched in 1999, and implemented in January of 2002. The EU is now planning further enlargement to include Eastern and Southern European nations. This sequence of events has been designed to enhance the overall growth of the member countries, by increasing openness and thus economic linkages and flows. One question that might be asked, however, is whether this has had a significant effect. In particular, one might expect linkages to exist simply due to the proximity of these nations, especially given alleged attempts to encourage such connections even before the formal implementation of the single market. To directly evaluate the productive impacts of EU policies, one might wish to quantify and assess both the existing economies associated with externalities...

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