Periodic Reporting for period 4 - GEPPS (Globalization, Economic Policy and Political Structure)
Berichtszeitraum: 2021-03-01 bis 2022-02-28
This growing mismatch between markets and states lowers the quality of economic policymaking. Since constituencies are located inside the state, governments tend to disregard effects of economic policies that are felt beyond the political border. The result is a worsening in policymaking that could seriously mitigate the gains from globalization and even turn them into losses. The goal of this project is to improve our understanding of how this growing mismatch between economic and political borders affects economic policy and political structure. In particular, it focuses on the inefficiencies this mismatch creates and on how should we (“the citizens of the world”) handle them.
The project is organized around two themes. The first one is the role of economic unions in improving economic policy making. The second theme is the border effect, that is, an analysis of whether national governments continue to be an impediment to trade in Europe.
The remaining three papers are on the border effect. To produce these papers, we constructed a new database on European regional trade. For the first time ever, we have a complete bilateral trade matrix for European regions. One of the papers provides a detailed description of European regional trade. Another paper estimates border effects and finds that regions in different countries trade only 17.5 percent what they would trade if they were in the same country. Thus, the border effect is still strong in Europe. Finally, a third project uses a quantitative model, calibrated with our data, to assess the impact of border changes in Europe.