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ABSTRACT A belief that EU integration is incomplete is often predicated on a comparison to U.S. states. Yet, with low barriers to trade and factor mobility between EU countries, is this belief correct? To address this question, we develop three theoretical predictions regarding the distribution of output and factors across members of an integrated economic area with harmonized policies and free movement of goods and factors. Empirical tests strongly support these predictions for U.S. states and 14 EU countries. Constructing a measure of integration, we find that EU integration rose from the 1960s to equal that of U.S. states by 2000.
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Document Type: Research Article

Affiliations: 1: McColl School of Business, Queens University of Charlotte, 1900 Selwyn Avenue, Charlotte, NC 28274. 2: Central Bank of Indonesia and University of Indonesia, Jl. M.H. Thamrin No. 2, Jakarta 10350, Indonesia. 3: Erasmus University Rotterdam, Tinbergen Institute and CESifo, Department of Economics, H8–8, Erasmus School of Economics, P.O. Box 1738, 3000 DR Rotterdam, The Netherlands.

Publication date: 01 October 2011

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