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Adam, Antonis
Moutos, Thomas
Year of Publication: 
Series/Report no.: 
CESifo Working Paper No. 704
In this paper we argue that strong political economy forces explain the rush of the EU to expand eastwards. We use a model of vertical product differentiation in order to claim that technologically- advanced EU firms (residing in high-income member countries) prefer a mutual market-opening with less technologically sophisticated countries than multilateral liberalization, which would necessarily involve the reciprocal opening of markets with other technologically-advanced countries. By the same token, less technologically sophisticated firms residing in low-income member countries would prefer an enlargement that is directed towards high-income countries. The evidence presented in the paper supports our hypothesis.
EU enlargement
vertically differentiated products
political economy
customs unions
Document Type: 
Working Paper

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