Extremely insightful, thank you, Luis. One comment: (1) your Figure 1 should be reflected in sovereign bond yields (apples-to-apples, i.e., yields on the euro-denominated bonds traded on luxse.com for the non-Eurozone countries). (2) In theory, these yields should create powerful incentives to "do something" or "stop doing something". (3) But the ECB distorts these yields by its yield support program—Cochrane, John H., Luis Garicano, and Klaus Masuch. Crisis Cycle: Challenges, Evolution, and Future of the Euro. Princeton, NJ: Princeton University Press, 2025. (4) So they do not reflect your Figure 1, and, consequently, (5) do not provide correct incentives, which, in a nutshell, means that (6) Draghi's "whatever it takes" is a contradiction to Draghi's Report.
the bit we keep noticing on our side (we track what vcs are funding) - the founders in tallinn, warsaw, vilnius behave very differently from those in paris and milan. do you think a fiscal crisis in italy or france would actually unstick things, or do the distributional coalitions just absorb the shock and keep moving?
Interesting article. One technical point confuses me – I don’t understand what you mean when you refer to statistical significance. Specifically, what population are you sampling from?
Yes, it is easier to grow when (i) you got out of communism 30 years ago and are far from the frontier and (ii) you receive each year a few GDP points worth of cohesion funds.
Absolutely, but that’s only half the story. The right question is: what was the risk-adjusted return, in terms of subsequent gains from trade, on the prior cohesion-fund investment in the new EU states?
It’s about the Edgeworth Box with expanding sides. Looking at Luis’s Figure 1 — which is just an amazing economics insight that I have not seen before — I infer that this return has been quite positive.
That would imply that the ex ante Shapley-value logic of EU enlargement has been confirmed — or at least strongly vindicated — ex post.
Extremely insightful, thank you, Luis. One comment: (1) your Figure 1 should be reflected in sovereign bond yields (apples-to-apples, i.e., yields on the euro-denominated bonds traded on luxse.com for the non-Eurozone countries). (2) In theory, these yields should create powerful incentives to "do something" or "stop doing something". (3) But the ECB distorts these yields by its yield support program—Cochrane, John H., Luis Garicano, and Klaus Masuch. Crisis Cycle: Challenges, Evolution, and Future of the Euro. Princeton, NJ: Princeton University Press, 2025. (4) So they do not reflect your Figure 1, and, consequently, (5) do not provide correct incentives, which, in a nutshell, means that (6) Draghi's "whatever it takes" is a contradiction to Draghi's Report.
Good point
Mark blyth has been talking about this effect for a long time
https://youtu.be/nwK0jeJ8wxg?si=_lIiz-vxB992uDFS&t=18
the bit we keep noticing on our side (we track what vcs are funding) - the founders in tallinn, warsaw, vilnius behave very differently from those in paris and milan. do you think a fiscal crisis in italy or france would actually unstick things, or do the distributional coalitions just absorb the shock and keep moving?
Interesting article. One technical point confuses me – I don’t understand what you mean when you refer to statistical significance. Specifically, what population are you sampling from?
Yes, it is easier to grow when (i) you got out of communism 30 years ago and are far from the frontier and (ii) you receive each year a few GDP points worth of cohesion funds.
Absolutely, but that’s only half the story. The right question is: what was the risk-adjusted return, in terms of subsequent gains from trade, on the prior cohesion-fund investment in the new EU states?
It’s about the Edgeworth Box with expanding sides. Looking at Luis’s Figure 1 — which is just an amazing economics insight that I have not seen before — I infer that this return has been quite positive.
That would imply that the ex ante Shapley-value logic of EU enlargement has been confirmed — or at least strongly vindicated — ex post.
Excellent read and insightful. As a Canadian we are seeing this happen in our own country from Alberta to BC
Very insightful as all your posts. Thank you