Review of Economic Integration

1
Review of Economic Integration

• ManEc 358
• Brother Bryson

2

• Europe has been rather spectacularly successful
  in its integration efforts. Many others have been
  far less successful. What makes for success?

3

• Consider again the prices that play a role in a
  customs union integration scheme

P domestic
P tariff
P part count
P world
4

• In your groups, discuss the proximities of given
  price lines in the set and elasticities of supply
  and demand that will make integration successful.

P domestic
P tariff
P prt cntrs
P world
5
First, check elasticities
The relative sizes of these gains depend on 1.
elasticities, the flatness of the curves.
Ptar
Ppcs
Imports
Imports
6
First, check elasticities
Where they are relatively elastic (flat), the
imports will be greater and gains go with more
extensive trade.
Imports
Imports
7
Price spread in integration

• Gains are greatest when the difference is
• small between partner and world.
• great between partner countries and us.

Ptar
Ppcs
c
c
Pw
8

• Large gains here. Large imports at near world
  prices (far better than our prices)

P domestic
P tariff
P part count
P world
9

• Small gains here. Small imports at prices near
  ours and way above world prices.

P domestic
P tariff
P part count
P world