European economy new lecture slides

Define the acronym EMU and its official meaning in the context of European integration

EMU stands for economic and monetary union It encompasses both the monetary union the euro and the single market

What was a common misunderstanding of the acronym EMU during the 1990s

Many mistakenly believed it stood for European monetary union and some even used it as shorthand for the entire Maastricht agreement including provisions unrelated to economic union

How has the usage of the term EMU shifted in modern discourse

Many now use it in a narrower sense to refer specifically to the monetary union the euro rather than the broader economic and monetary union

What is the primary thesis of Stanley Hoffmanns 1966 work regarding the nation state

Hoffmann explored whether the nation state was obsolete or obstinate questioning its fate and resilience in the face of Western European integration

How does Stephen D Krasner 1999 define sovereignty

Krasner describes sovereignty as organized hypocrisy suggesting a gap between the formal rules of international relations and the actual behavior of states

In the context of European economic theory what is Paul Krugmans 2012 critique regarding currency areas

Krugman discusses the Revenge of the Optimum Currency Area analyzing the difficulties faced by the Eurozone when it fails to meet the criteria of an optimal currency area

What is the core argument regarding extractive institutions in the context of education and emigration

Extractive institutions can increase conflict risk and depress opportunities for highly educated individuals creating a spurious correlation between conflict and the positive self selection of skilled emigrants

How do researchers address the concern of spurious correlations between education levels and conflict when studying migration

They exploit variation in conflict intensity at the sub regional level using geo coded data to isolate the specific impact of conflict on migration choices

What are Malthusian dynamics in the context of recent economic research on population growth

Malthusian dynamics refer to the causal effect of population growth on conflict as studied by researchers like Brückner 2010 and Acemoglu

Compare the Gross Domestic Product per capita GDPPC at purchasing power parity PPP in Germany Sweden to sub Saharan African countries as of 2015 2016

The GDPPC at PPP in Germany and Sweden is 8 to 35 times higher than in sub Saharan African countries

What explains why highly skilled individuals are often found to be more mobile than the poorest populations

Liquidity constraints and immigration restrictions often prevent the poorest individuals from migrating whereas the highly skilled have more resources and opportunities to relocate

Identify three powerful push factors for international migration in poor countries of origin

The three primary push factors are low growth high youth unemployment and environmental problems

How does the theoretical model of emigration build upon the Borjas 1987 framework

It simplifies the Borjas framework but adds gender specific risks related to conflict persecution and gender specific returns to human capital

In the human capital model of wages what does the component exp w k g represent

It captures the wage available to individuals with only a primary education in country k for a specific gender g

In the human capital model of wages what does the variable r k g represent

It represents the gender specific return to human capital skills education that an individual possesses beyond primary education in country k

Under what condition is it considered ex ante rational for an individual to migrate from origin country k to destination d

It is rational if the expected utility of migrating U i d g is greater than the expected utility of staying in the home country U i k g

What assumption is made about the distribution of migration costs shocks e i to ensure migration occurs

The distribution is assumed to be sufficiently wide so that under all relevant circumstances some individuals choose to migrate while others choose to stay

What are the History and Policy learning objectives for Lecture 1 Part 1

The objectives include understanding current crises the motivation for the EU and a general overview of the EU at a glance

Identify the core Economic Concepts listed for Lecture 1 Part 1 Motivation

The concepts are recession cooperation and destabilisation

What additional economic concepts are highlighted in Lecture 1 regarding integration incentives

Key concepts include economic interdependence the European Social Model GDP incentives early adopters and bargaining

As of the 2025 2026 academic session how many years of unprecedented stability have passed since the end of widespread war in Europe

81 years have passed since the end of widespread war in Europe

When did the Irish economy officially bottom out during the Great Recession

The Irish economy bottomed out in late 2010

Define the term Iron Curtain as used in European history

The Iron Curtain refers to the political boundary that divided Europe into the East and West during the Cold War

What are the History and Policy learning objectives for Lecture 1 Part 2 Post war Europe

Objectives include the transition from war to further instability the Iron Curtain and the Marshall Programme

What are the five core economic concepts listed for the study of post war European integration

The concepts are capitalism nationalism centralisation federalism and intergovernmentalism

In the context of European integration which approach is defined by state centrism and protection of national sovereignty

Intergovernmentalism

Why is elite socialisation specifically noted as NOT being a feature of intergovernmentalism

Intergovernmentalism focuses on state centrism and zero sum bargaining between sovereign nations rather than the integration of elites into a supranational culture

Which group believes the nation state to be the most stable form of government Federalists or Intergovernmentalists

Intergovernmentalists

What style of governance dominated the Organisation for European Economic Co operation OEEC

The OEEC was dominated by intergovernmentalism

What were the two primary successes of the European Payments Union EPU

The EPU was successful in pooling bilateral trade deficits and easing the need for inter nation barter

What are the learning objectives for Lecture 1 Part 3 ECSC

Objectives include the motivation for the federalist approach intergovernmentalism and the formation of the ECSC European Coal and Steel Community

Identify the economic concepts relevant to the application of the ECSC

Concepts include preferences cooperation uncertainty cartels economies of scale functionalism heterogeneity public goods and asymmetric information

When was the European Coal and Steel Community ECSC formed and by what treaty

The ECSC was formed in 1952 following the 1951 Treaty of Paris

Who were The Six original members of the ECSC

The Six were France Italy West Germany Belgium the Netherlands and Luxembourg

How were decisions regarding pricing trade and production handled within the ECSC

Decisions were made by a supranational High Authority

What is the fundamental trade off in political economy discussed by Spolaore 2013 regarding integration

The fundamental trade off is between economies of scale the efficiency of being larger and heterogeneity costs the cost of diverse preferences in a unified group

Explain the chain reaction approach to European integration

The chain reaction approach suggests that partial integration in specific sectors like coal and steel creates functional pressures that lead to further integration in other sectors

In the context of integration what is an example of a public good that is non rival in consumption

Examples often include defense security or clean air where consumption by one state does not reduce availability for others and integration allows for economies of scale

In the interaction between groups with heterogeneous preferences how does the nature of rival goods differ from public goods

Rival goods like food or specific products typically result in less benefit from unified preferences compared to public goods as consumption by one individual reduces the amount available for another

How would a population becoming more homogenous in preferences affect the level of specialisation across countries

It would likely decrease the levels of specialisation as distinct national tastes like French wine or German cars are a primary driver of trade based on diverse preferences

Contrast the intergovernmental and functional views of European integration drivers

In the intergovernmental view national governments are the drivers in the functional view technical needs and spillover effects drive integration

How does asymmetric information hinder voters and governments from stopping further integration according to functionalist theory

Voters and national governments may lack the technical information held by supranational officials making it difficult to recognize or oppose the incremental steps toward deeper integration until they have already occurred

How can heterogeneity of preferences affect the chain reaction of European integration

High heterogeneity increases the political cost of integration potentially slowing down or breaking the chain reaction if the costs of common policies outweigh the economic benefits of scale

What are the History and Policy learning objectives for Lecture 2 Part 1 regarding the founding of the EEC

The objectives include the concept of the United States of Europe and the founding of the EEC

Identify the first six economic concepts listed for Lecture 2 1

The concepts are correlation causation counterfactual confounding heterogeneity and customs union

Identify the remaining economic concepts listed for Lecture 2 1

The concepts are common market state aid tariffs quotas and technical barriers to trade

What were the three major components of the 1957 Treaty of Rome

Removing all tariffs on intra EEC trade Adopting a common external tariff on imports from non members Adopting common institutions and decision making mechanisms

Define The Four Freedoms established by the Treaty of Rome

Goods Elimination of tariffs and quotas Services Freedom to provide services across borders Capital Free movement of investment and money Workers People Mobility of labor for market function

In the EU why might tax exemptions for specific employees be considered state aid

Because they provide a selective advantage that can distort competition within the common market

Which European institution has the primary power to make decisions and issue penalties regarding anti competitive behavior

The European Commission

Why was the European Free Trade Association EFTA formed in 1960

It was formed by countries that wanted free trade but were excluded from or reluctant to join the EEC specifically to mitigate the discriminatory effects of the EECs common external tariff

What are the learning objectives for Lecture 2 Part 2 Domino Theory

The objectives cover EFTA and the first EEC enlargement

Define Trade Creation in the context of a trade bloc

Trade creation occurs when high cost domestic production is replaced by low cost imports from a member of the trade bloc

Define Trade Diversion in the context of a trade bloc

Trade diversion occurs when low cost imports from a non member are replaced by higher cost imports from a member because the member country has tariff free access

Explain Baldwins Domino Theory of regional integration

The theory suggests that the creation enlargement of a trade bloc causes trade diversion for outsiders which triggers political pressure in those outside countries to join the bloc to avoid economic disadvantage

Which EEC member was famously reluctant to accept new members during the first enlargement process

France notably under Charles de Gaulle

Which EFTA member was the first to formally request EEC membership

The United Kingdom

What is a Technical Barrier to Trade TBT Give three examples

A TBT is a non tariff barrier arising from regulations Examples include labelling cigarettes as harmful mandatory seatbelts in cars and specific industrial technical standards

What was the European Monetary System EMS of 1979 and what was its key mechanism

The EMS was an arrangement to achieve exchange rate stability in Europe by tying pegging member currency values to the German Mark

Define Stagflation a concept relevant to the 1970s Euro pessimism period

Stagflation is an economic condition where high inflation occurs simultaneously with high unemployment and stagnant demand

According to Bordo 2017 why do unstable exchange rates negatively affect trade

Unstable rates create uncertainty and exchange rate risk making it difficult for firms to predict costs and revenues which discourages cross border investment and trade

What does it mean for a country to devalue its currency and what is the typical motivation

Devaluation is the deliberate downward adjustment of a countrys official exchange rate The motivation is usually to make exports cheaper and more competitive on world markets

Identify the three main problems that led to the downfall of the Bretton Woods system

The three problems were adjustment confidence and liquidity

Who was Jacques Delors and what was his role in European integration

He was the European Commission President 1985 to 1994 and the primary architect of the Single European Act and the path toward the Euro

What was the stated goal of the 1987 Single European Act SEA

The goal was to create an area without internal frontiers in which the free movement of goods persons services and capital is ensured by 1992

List four examples of barriers the Single Market Programme aimed to remove

Capital controls Preferential public procurement favouring local firms VAT and excise tax rate differences Administrative and frontier formalities

Explain the Trilemma Impossible Trinity in international economics

The hypothesis states that a country can only maintain two of the following three options at once Capital Mobility Free movement of money Sovereign Monetary Policy Independent interest rates Fixed Exchange Rate System

What is the motivation for a country to prevent residents from buying foreign currency as a form of capital control

The motivation is to protect the value of the domestic currency by preventing capital flight and excessive selling of the local currency

What is the consequence of capital controls that prevent non residents from purchasing property

It acts as a barrier to trade and investment specifically limiting foreign direct investment FDI in the real estate sector

Define Investment Diversion in the context of the European Economic Area EEA

Investment diversion occurs when Foreign Direct Investment FDI is shifted away from non member countries and toward member countries to gain access to the integrated single market

What were the primary benefits and drawbacks for EFTA countries joining the EEA

Benefit Access to the Single Market Drawbacks Having to adopt EU laws without having representation in decision making and contributing to the EU budget

What are the four Copenhagen Criteria 1993 for countries wishing to join the EU

Stable Institutions democracy rule of law Functioning Market Economy Ability to take on obligations of membership Public administration capacity to enact EU laws

Which countries joined the EU in the Fifth Enlargement in 2004

Czech Republic Cyprus Estonia Hungary Latvia Lithuania Malta Poland Slovak Republic and Slovenia

What is the primary role of the European Council

It defines the general political direction and priorities of the EU and decides on major strategic choices

Define the Three Pillars structure of the EU established by the Maastricht Treaty

The European Community EC Supranational governance Common Foreign and Security Policy CFSP Intergovernmental Justice and Home Affairs JHA Intergovernmental

List the four major EU treaties that followed the Maastricht Treaty to prepare for enlargement

Amsterdam Treaty 1997 Nice Treaty 2000 Constitutional Treaty 2004 failed Lisbon Reform Treaty 2007

Define Competence Creep in the context of EU policy

It refers to the increasing erosion of EU rule into policy areas where the EU does not technically have a legal mandate or remit

Which EU legal instrument is binding in its entirety and directly applicable in all member states without needing national transposition

Regulations

What is a Directive in EU law

A Directive is binding with respect to the intended result but leaves the choice of form and method to the individual member states it must be transposed into national law

What are the three main own resources that provide the vast majority of EU revenue

GNI based contributions the largest element Customs duties VAT based contributions

What is the Multiannual Financial Framework MFF

It is the EUs 7 year budget plan that sets limits on spending for different policy areas

What was NextGenerationEU

It was a COVID 19 recovery package worth over 800 billion euros consisting of both grants and loans to member states

Define Consumer Surplus in welfare analysis

Consumer surplus is the difference between what a consumer is willing to pay reservation price and the market price they actually pay

Define Producer Surplus in welfare analysis

Producer surplus is the difference between the market price and the marginal cost of production for the firm

What is Total Welfare in a market

Total Welfare equals Consumer Surplus plus Producer Surplus plus Government Revenue if any

Define Deadweight Loss

Deadweight loss is the loss of total welfare that occurs when a market is not in equilibrium often due to taxes or tariffs that reduce the volume of trade

What is an Import Demand Curve MD

The MD curve represents the difference between the quantity that domestic consumers demand and the quantity that domestic producers supply at each price level

What are the general distributional consequences when an economy opens up to imports

Consumers generally gain surplus lower prices while domestic producers lose surplus increased competition

Explain the Border Price Effect resulting from an increase in world prices

It is the change in welfare resulting from the higher price paid to foreign suppliers for the existing volume of imports

What is a Most Favoured Nation MFN tariff

An MFN tariff is a non discriminatory tariff that a country applies equally to all trading partners who are members of the WTO unless they have a preferential agreement

Identify the three components of Home welfare change when a tariff is introduced

Consumer Loss minus E minus C1 minus A minus C2 Producer Gain plus E Government Revenue plus A plus B

What is the Net Change in home welfare after a tariff

Net Change equals B minus C1 plus C2 Whether this is positive depends on if the revenue gain from foreign producers B outweighs the deadweight loss C

What is the World Welfare effect of a tariff

World welfare always decreases by the sum of the deadweight losses minus C minus D

Define Adam Smiths Certitude regarding Preferential Trade Agreements PTAs

The certitude that partner nation producers and home consumers always derive great advantage and benefit from a PTA

Define Haberlers Spillover in PTAs

The concept that third nations non members always lose out when two other nations form a preferential trade agreement

Define Viners Ambiguity in PTAs

The concept that the net welfare effect on the home nation is ambiguous because the benefits of trade creation may be offset by the costs of trade diversion

What are Rules of Origin and why are they necessary in a Free Trade Area FTA

They are rules used to determine where a product was made They are necessary in FTAs to prevent tariff cheats where goods are imported into the member with the lowest tariff and then shipped to other members

What differentiates a Customs Union from a Free Trade Area

A Customs Union includes a Common External Tariff CET applied to all non members whereas an FTA allows members to set their own individual external tariffs

Distinguish between Traditional Trade Theory and New Trade Theory

Traditional Focuses on Comparative Advantage differences in productivity resources New Focuses on Economies of Scale and Variety for consumers

According to Ricardos theory if France takes 1 hour to make cheese and 2 hours for wine while Hungary takes 6 hours for cheese and 3 for wine who has the comparative advantage in wine

Hungary has the comparative advantage in wine because its opportunity cost one half unit of cheese is lower than Frances two units of cheese