European Economics
Master in European and International Governance
2020-2021
,Table of Content
Structure and themes
• Part I: history, facts and institutions (intro to the EU)
o First 3 chapters
• Part II: the microeconomics of economic integration
o Lot of time
o Already start today: main elements of free trade agreements, imposing tariffs
on some countries, not on others
• Part III: EU micro policies
o Competition policy, agricultural policy, …
o Importance of solidarity mechanisms
• Part IV: the macroeconomics of monetary integration
o European semester
o Essential rules
• Part V: EU monetary and fiscal policies
o Economic Crisis of 2010 and how this improved our macroeconomic policy
coordination
o What we learned from the Crisis
Class 1: Introduction, chapter 4
• Introduction
• Chapter 4: essential microeconomic tools an tariff analysis
o Preliminaries I: supply and demand
o Welfare analysis: consumer and producer surplus
o Preliminaries II: import demand curve
o Preliminaries II: export supply curve
o The workhouse diagram: MD-MS
o MFN tariff analysis
o Welfare effects of a tariff
o Trade wars using tariffs…
o Types of protection
Class 2: chapter 5 and chapter 6
• Chapter 5: the essential economics of preferential liberalization
o Analysis of unilateral discriminatory liberalization
o The RTA diagram
o Discriminatory liberalization
o Supply-switching effects of EEC customs union
o Welfare effects
o Excursus: home welfare effects in more detail
o Analysis of a customs union
o Customs union versus free trade agreements
o Frictional barriers: the 1992 program
2
, o ‘Deep’ trade agreements
o WTO rules
• Chapter 6: market size and scale effects
o Market size matters
o Market size matters: some evidence
o The BE–COMP-diagram in a closed economy
o The impact of European liberalization
Class 3: Chapter 7, chapter 8
• Chapter 7: growth effects and factor market integration
o The logic of growth
o Post-war European growth: the evidence
o Investment and output per worker
o Investment and labor productivity
o Determinants of long-run growth
o Liberalization, allocation effects, and the medium-run growth bonus
o Medium-term growth effects: the Solow diagram
o Medium-term growth effects: EU accessions
o Long-term growth effects: faster knowledge creation and absorption
o Long-term growth effects
• Chapter 8: economic integration, labor markets and migration
o European labor markets: a brief characterization
o Labor market: equilibrium and employment
o Effects of trade integration on labor markets
o Migration: some facts
o Labor markets: demand and supply
o Migration: the simplest framework
o Migration: further remarks
o Barriers to mobility
Class 4: guest lecture - economic policy coordination in the EU
The European semester and the recovery and resilience facility
• EU competences
• A closer look at the legal base
• Scope and instruments of EU economic policy coordination
• The Annual Surveillance Cycle
• Country-specific recommendations: example
• The Commission’s economic narrative
• The worst crisis in living history
• The EU crisis response
• The Recovery and Resilience Facility
• The challenges ahead
• Questions
3
, Class 5: chapter 9
• Chapter 9: the common agricultural policy
• CAP: Brainstorm and introduction
• The Common Agricultural Policy
• The simple old logic: price supports
• The old logic: step by step
• Direct consequence
• Uneven distribution of benefit
• Changed circumstances and CAP problems
• Changed circumstances – step by step:
• Unintended consequences: farm income problem
• Unintended consequences: CAP paradox
• Unintended consequences: other problems
• The simple economic logic of the new CAP
• CAP reform more recently
Class 6: chapter 10
• Chapter 10: regional policy – differences between regions and countries
o Location effects, economic geography and regional policy
§ Why do we observe differences in GDP/capita and employment rates
between countries and between regions within countries?
§ Regional/cohesion policy is necessary
o The case of Malta’s manufacturing
o Location factors: importance-performance gaps
o Importance-performance analysis
o Focus: potential to remedy
o Europe’s economic geography: the facts
o Summary of the facts
o Theory part I: comparative advantage
o Theory part II: new economic geography
o The locational effects of European integration
o The locational effects of European integration: considering additional
complicating factors
o Theory part III: putting it all together
o EU regional policy
o EU regional policy: proposed reforms for 2021–2027
Class 7: chapter 11
• Chapter 11: EU competition and state aid policy
o In short
o EU’s role in competition policy
o EU competition policy
o European Commission – DG COMP
o Three pillars
o EU competition policy
4
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