European Integration: Some stylised facts



Table 1: Rating of the degree of integration

Rating

Comments

Microeconomic convergence:

a Markets for goods and services

Tradeables

+++

intense intra-EU trade, nearly

Full equalisation of prices

Partly tradeables

+

Increasing trade flows, some
Equalisation of prices

b

Non-tradeables

Markets for factors of production

0

By definition no trade flows, no
Equalisation of prices

Labour market

0

No mobility and hence, no
Equalisation of wages

Market for real capital

Macroeconomic convergence:
c Nominal convergence

++

Some mobility manifested through FDI flows, mergers
and acquisitions - equalisation of real profit
rates

Price level

++

Labour intensive non-tradeables cheaper in poor
countries, hence not full equalisation of price
levels

Inflation rates

+++

intense intra-EU trade and stable exchange rates
(especially the introduction of the euro) have
lead to a convergence of inflation rates

d

Nominal interest rates

Real convergence

+++

massive cross-border financial activities in the framework
of stable exchange rates has lead to a
convergence of interest rates

Business cycle synchronisation

+

Member state specific business cycles because of different
economic structures and lack of co-ordination
of fiscal policy

Unemployment

0

No equalisation of employment because of country
specific business cycles and different labour
market structures

Living standards

+

Mixed trends of convergence of living standards because
of ambiguous effects of mobility of goods and
resources on spatial distribution of economic
activity

Note: Rating of integration according to outcome, i.e. degree of equalisation between Member States.
Ratings from 0 (no integration) to full integration +++++.

Source: Own adaption.

Markets for goods and services

The formation of the customs union and the Single Market has as expected
increased the intra-EU trade as shown in Figure 1. Also the trade between the

12



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