Out of the Dark into the Light? Border Urban Municipalities and Eastern EU Enlargements (job market paper)
Abstract
In this paper, I use the Eastern EU enlargements as a quasi-experiment to assess the impact of integration on the border areas. As such, I compare the growth of night-time light emissions in urban municipalities close to the treated borders to municipalities located in the interior of the same countries applying staggered differences-in-differences approach. I find a positive average treatment effect for urban municipalities that are part of the 2004 EU enlargement and bordering other countries of the 2004 expansion cohort. Moreover, my results indicate the importance of anticipation, as economic activity increased in the 2004 new member states near borders with EU15 before EU accession. The positive impact on the 2004 enlargement also shows the importance of market access. Smaller urban municipalities of the 2007 enlargement display an enhanced economic development in comparison to the hinterland. Also, it seems that proximity to borders made up of mountains or rivers might restrict the positive impact of EU accession for border areas.
Motivation
- Borders limit the trade between countries (McCallum, 1995) and development of the areas adjacent to them (Redding and Sturm, 2008; Fantechi and Fratesi, 2023).
- Removing the barriers to trade results in growth of border areas (Brülhart et al., 2018; Brakman et al., 2012; Mitze and Breidenbach, 2024).
Research questions
- Do border urban municipalities benefit more from the Eastern EU enlargements in comparison to urban municipalities in the hinterland?
- What factors facilitate the benefits of Eastern EU enlargements for urban border municipalities?
Contributions
- Taking a advantage of accessible yearly data on proxy of economic activity (nighttime lights (NTL), (Li et al., 2020)) to combine granular approach (urban municipalities) with spatial broadness (all countries of the Eastern enlargements and their EU15 neighbors).
- Use of state of the art causal inference methods (Callaway and Sant’Anna, 2021) to estimate heterogeneous treatment effects.
Empirical strategy
- Method: Staggered difference-in-differences.
- Municipalities located less than 25 km away from the border form the treatment group and municipalities located between 50 and 100 km form the control group.
- Dependent variables: Growth of an urban municipality’s share of national urban night-time lights
- Dataset of 753 urban municipalities from 1992 until 2021.
Results
- Insignificant overall effect, but negative effect for urban NMS municipalities near borders with EU15 and positive impact on both sides of NMS–NMS borders (2004 enlargement).
- Urban municipalities in 2004 and 2007 NMS near EU15 borders possibly benefited from pre-enlargement liberalization.
- The impact of enlargement might be also conditional on market access, population size of the urban municipalities and physical geography.
References
Brakman, S., Garretsen, H., van Marrewijk, C., and Oumer, A. (2012). The border population effects of eu integration. Journal of Regional Science, 52(1):40–59.
Brülhart, M., Carrère, C., and Robert-Nicoud, F. (2018). Trade and towns: Heterogeneous adjustment to a border shock. Journal of Urban Economics, 105:162–175.
Callaway, B. and Sant’Anna, P. H. (2021). Difference-in-differences with multiple time periods. Journal of Econometrics, 225(2):200–230.
Fantechi, F. and Fratesi, U. (2023). Border effects on firm’s productivity: The role of peripherality and territorial capital. Papers in Regional Science, 102(3):483–507.
Li, X., Zhou, Y., Zhao, M., and Zhao, X. (2020). A harmonized global nighttime light dataset 1992–2018. Scientific data, 7(1):168.
McCallum, J. (1995). National borders matter: Canada-US regional trade patterns. The American Economic Review, 85(3):615–623.
Mitze, T. and Breidenbach, P. (2024). The complex regional effects of macro-institutional change: Evidence from EU enlargement over three decades. Review of World Economics, pages 1–33.
Redding, S. J. and Sturm, D. M. (2008). The costs of remoteness: Evidence from German division and reunification. American Economic Review, 98(5):1766–97.