Making Regions Great Again : Winning Big with European Integration

Overview & Synopsis

In this thesis, I examine the opportunities and challenges that regions in the European Union (EU) face during the process of European integration. EU membership grants access to the world's largest common market, but not all regions benefit equally. Peripheral regions or those specialized in less competitive industries may encounter significant obstacles. To counteract such disparities, the EU employs Structural and Investment Funds (EU Funds). The first chapter introduces a novel instrumental variable to address endogeneity concerns and incorporates potential spatial spillovers. The results show that EU Funds foster regional growth, with spillover effects that can even surpass direct impacts. The second chapter investigates the consequences of the Eastern enlargements for border urban municipalities. While borders often constrain development, EU accession transforms them into internal regions of the common market, potentially stimulating growth. The analysis reveals that the benefits of enlargement depend on local characteristics, the nature of the border, and the countries on both sides, with evidence highlighting the role of market potential. Finally, the third chapter studies the 2004 enlargement from the perspective of firms. The findings suggest that firms in new member states close to EU15 borders experience declining profitability relative to interior firms. However, smaller firms in these areas display relatively higher profitability, pointing to competitive pressures from EU15 firms as a potential deterrent for larger firms.