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European integration: the third step

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  • Harry Bowen
  • Leo Sleuwaegen

Abstract

A perception of declining EU competitiveness has intensified calls for structural reforms within the EU. This paper examines recent evidence on changes in relative EU competitiveness and considers the observed changes in relation to the evolving competitive environment facing EU firms during the past two decades. Our analysis suggests that recent declines in EU competitiveness reflect an adjustment (or lack thereof) within the EU in response to an evolutionary “Third Step†in the process of EU integration: global market integration. We find that, starting from the mid-1990s, the EU began to face unprecedented increases in external sources of competition. The rising competition from external sources has created pressures for EU firms to alter their organizational and product market strategies to meet the challenge of a globally integrating market. While many leading EU firms are found to have responded to this challenge, EU firms remain hampered by anachronistic EU product and labor market regulations. The growing calls for structural reform therefore reflect the increased external competitive pressure on EU firms as they attempt to respond to growing global competition and to thereby strengthen their global competitiveness.
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Suggested Citation

  • Harry Bowen & Leo Sleuwaegen, 2007. "European integration: the third step," International Economics and Economic Policy, Springer, vol. 4(3), pages 241-262, November.
    • Handle: RePEc:kap:iecepo:v:4:y:2007:i:3:p:241-262
    DOI: 10.1007/s10368-007-0089-1
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    1. Lewis, William W., 2004. "The Power of Productivity," University of Chicago Press Economics Books, University of Chicago Press, number 9780226476766.
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    Cited by:

    1. Cheung, Cherry & Coucke, Kristien & Neicu, Daniel, 2011. "A Decision Tree as a Quick Scan for Effective Market Functioning," Working Papers 2011/06, Hogeschool-Universiteit Brussel, Faculteit Economie en Management.
    2. René Belderbos & Leo Sleuwaegen & Reinhilde Veugelers, 2010. "Market Integration and Technological Leadership in Europe," European Economy - Economic Papers 2008 - 2015 403, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    3. Harry P. Bowen & Haris Munandar & Jean-Marie Viaene, 2008. "On the Extent of Economic Integration: A Comparison of E.U. Countries and U.S. States," Discussion Paper Series 2008-01, McColl School of Business, Queens University of Charlotte.

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    More about this item

    Keywords

    Competitiveness; European integration; Foreign competition; Globalization; D21; F02; F23; L10; O40;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • F02 - International Economics - - General - - - International Economic Order and Integration
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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