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Journal of Economic Integration 2015 September;30(3) :501-531.
DOI: https://doi.org/10.11130/jei.2015.30.3.501
European Integration and the Effects of Country Size on Growth
Jörg König 
Georg-August-University of Goettingen & Stiftung Marktwirtschaft, Berlin, Germany
Corresponding Author: Jörg König ,Tel: +49 551397412, Fax: +49 551397093, Email: joerg.koenig@uni-goettingen.de
Copyright ©2015 Journal of Economic Integration
ABSTRACT
Does the size of a country affect its economic growth rate? Theory suggests that the existence of a national scale effect is favouring large countries and that small countries may overcome the impediments of smallness once their markets become internationally more integrated. So far, empirical evidence of a distinct impact of country size on economic growth is rather limited. The present study sheds light on this impact from a European perspective. Country size indeed correlates with economic growth and European economic integration enhances the convergence process of the countries. It is further shown that the impact of size varies according to a country’s individual level of economic integration, suggesting that the long-term economic growth path is characterized by multiple transition points. This finding is particularly important given the prevailing imperfections of the European Union Single Market and the increasing number of small European Union member states.

JEL Classification
C23: Models with Panel Data; Longitudinal Data; Spatial Time Series
F15: Economic Integration
F43: Economic Growth of Open Economies
O52: Europe
Keywords: Country Size | European Economic Integration | Economic Growth | Economic Convergence | Panel Data | Fixed Effects
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