Econometric Analysis of Impact of Relative Location on the Growth Effects of Economic Integration. The case of the EU

In the paper we construct two novel indices of relative centrality – peripheriality in order to test whether location has an impact on medium and long-run growth rates of the European Union Member States. We utilize two popular econometric approaches – standard cross-sectional growth regressions as well as dynamic panel data models. The study is undertaken for 27 developed economies (15 EU Member States and 12 non-members) within a period 1960 to 1999. In accordance with the new economic geography models (NEG) our results indicate that relative location within large regional integration arrangement such as the European Union could at least to some extent affect growth effects associated with the process of economic integration. Furthermore, the benefits are found to be asymmetrical between the core and peripheral states. These results, however, need further empirical investigation as they are found to be rather sensitive.