Emerging Market Economies and European Economic Integration
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Book Review Emerging Market Economies and European Economic Integration R Scott Hacker, Borje Johansson, and Charlie Karlsson (eds), Edward Elgar: Northampton, MA, 2004, pp. 328. Comparative Economic Studies (2006) 48, 382–384. doi:10.1057/palgrave.ces.8100138
Comprising papers from a 2002 conference of the European Regional Science Association, this valuable volume’s title omits specific reference to the regional dimension of transition. While dealing with European states, what is novel here is a unifying spatial (eg local) perspective on two overlapping phenomena – movement towards market-based mechanisms and harmonisation of national policies. This economic–geographical slant on uneven development, job creation, and income generation applies insights from a rich variety of economic sub-literatures to the impact of transition and integration on (sub-or cross-national) regions. Part I contains three papers with a regional perspective. Johannes Brocker highlights the common basis for international and inter-regional trade, by characterising international trade as a special case of regional trade models, rather than the reverse, as typically assumed. More strikingly, Brocker shows how imperfect competition-based trade theories improve on the factor endowment-grounded Heckscher-Ohlin framework, providing a firmer theoretical foundation for the gravity equation. The latter – which highlights geographical distance as a determinant of trade flows – has proven particularly powerful in explaining inter-country (and inter-regional) trade. Viesturs Pauls Karnups takes an historical look at Latvian-Scandinavian trade, motivated in part by the work of B Eichengreen and DA Irwin, among others, who emphasize the influence on current trade of sunk costs inherent in historical trade relations. Although a gravity equation approach predicts relatively robust Baltic-Scandinavian trade, it never fully recovered its moderate volume from the Great Depression. Germany and the UK crowded out Baltic-Scandinavian regional trade then, as it does now, although overlapping commodity composition among the Baltic and Scandinavian states also contributed. An intriguing paper by Mikolaj Herbst and Karol Olejniczak studies the impact of transition-cum-integration on border trade. They contrast three eastern Polish towns which adjoin Lithuania, Belorussia, and Ukraine, and highlight influences from trade liberalisation on local incomes and employment. Inter-country turnover increases when border controls are relaxed, but
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these localities suffer a sharp decline in employment and incomes from the obsolescence of border-crossing installations. The study demonstrates how superior leadership in the border municipalities is critical in catapulting the positive impulse from initial liberalisation to sustainable cross-border interaction and growth, well beyond the temporary and limited expansion of local market, suitcase trade. More durable benefits require developing inter-enterprise supply linkages, cross
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