8105 - EUROPEAN ECONOMIC POLICY

The course aims at developing and applying formal economic concepts and models to the process of European integration now enlarged to 25 Member States (EU-25). By the end of this course, students should be able to apply standard economic tools to the analysis of most policies and proposals of the type discussed in the context of the current daily debate on the EU. Apart from a general, institutional knowledge of the European Union (developed in other undergraduate programs or in other courses), this advanced course aims at assessing the economic rationale of the process of EU integration and its most important policies, the factors responsible for their success or failure, and possible reform options when relevant.
The first part of the course is devoted to studying the impact of economic integration on trade and investment patterns, the location of economic activity and growth. The second part of the course presents the economic foundations of the main European policies (agriculture, cohesion, Economic and Monetary Union) assessing their current status in light of the EU enlargement and possible paths of evolution over time. In the third part of the program, a specific attention is devoted to the Institutional evolutions of the EU, analysed through appropriate models of political economy.

First part - Causes and consequences of economic integration   (C. Altomonte)

• Economic integration, preferential trade agreements and multilateralism: an overview
• Chronology and taxonomy of EU integration
• Enlarging the Union: the economics of transition
• Enlarging the Union: the accession of the new Member States
• Partial equilibrium analysis of economic integration: trade creation and trade diversion
• General equilibrium effects of integration: tariffs preferences and the terms of trade
• Economic integration under imperfect competition: economies of scale and the theory of common markets
• The international location of economic activities: FDI trends and determinants
• Economic integration and the international location of economic activities: from the neo-classical results to the New Economic Geography
• Economic integration and the international location of economic activities: empirical evidence in EU-25

Second part - The economics of the main EU policies          (M. Nava)

• The economic rationale of the EU objectives: growth and stability
• The economic rationale of the EU objectives: cohesion
• Growth, stability and cohesion: the institutional setup of the EU objectives
• The tools for Growth: The completion of the Single Market and Lisbon
• The tools for Stability: the Economic and Monetary Union
• The tools for Cohesion: EU Budget and national policies
• Discussion on Growth: bad planning, bad practice or simply bad luck?
• Discussion on Stability and Cohesion: does the EU want more of it? At which prices?

Third part - The political economy of Unions                        (F. Passarelli)

• The theory of optimal level of government
• The Federal vs. the Confederal model: theory
• Competencies and Institutions in the EU
• From the Nice Treaty to the Constitutional Treaty
• The measurement of political power
• The new distribution of power in the EU

Background reading:

• C. ALTOMONTE, M. NAVA, The economics of an enlarged Europe, Edward Elgar, forthcoming

Selected chapters from the following books:

• J. BHAGWATI ET AL., Trading Blocs, MIT Press, 1999
• J. MARKUSEN, Multinational firms and the Theory of International Trade, MIT Press, 2002
• R. BALDWIN, C. WYPLOSZ, The Economics of European Integration, McGraw Hill, 2003
• A. SAPIR ET AL., An Agenda for a Growing Europe: Making the EU Economic System to Deliver, Oxford University Press, 2003
• D. MUELLER (ed by), Perspectives on Public Choice, Cambridge University Press,1997
• S.J. BRAMS, ET AL. (ed. by), Political and related models, Springer, 1983

Additional notes/readings will be provided when dealing with specific topics covered in the programme.

Written exam covering all 3 parts of the course. Two partial exams or one general exam.