In
this paper we try to put together both the dynamics of the endogenous
evolution
of an industry and the corresponding dynamics on the capital market.
The first
module of our modelling efforts is the endogenous evolution of the
industry
based on the micro-behaviour of boundedly rational agents. They strive
to
undertake entrepreneurial actions and found new firms. Thereby, the
role of
knowledge diffusion is emphasized. The second module, the capital
market
module, will also be represented by boundedly rational agents. They
read the
data of the real side of the economy – induced by the real economy
module –
interact with other investors and eventually derive their investment
decisions.
The cognitive process will be modelled using a neural network approach.In
the previous decades, the European Union (EU) has succeeded in
integrating new member countries, in economic and in political
respects. Three
main reasons lie behind this successful integration process: First, the
solidarity of richer EU members with their poorer counterparts, second,
the
effectiveness of the integration policies conducted by the EU, and
third, the
willingness of new member countries to arouse and accomplish an
economic
catch-up process towards EU average levels.
With the enlargement by ten new members in May 2004, the EU is facing
the biggest challenge in its history. Thereby, the population of the
In this paper, we want to investigate whether the
One of the main findings of our analysis is that the EU will have to
manage a highly difficult trade-off between the stimulation of
Union-wide economic
convergence and international competitiveness of its member countries.
In the
short-run, the process of European integration can well be deepened,
given that
the current controversies with regard to the financing of European
support
programs for poorer members and with regard to the implementation of a
new
constitution for the EU will be resolved. In
the long-run, even if these controversies can be remedied, it appears
likely
that the dynamic process of European integration will not proceed as
smoothly
and as successfully as it did in the past. That is because the economic
disparities across EU member countries have never been larger, and
because the
"development funds" now need to be distributed among a larger number
of countries than in the past. Apart from
these
difficulties, it can be expected that the concentration on
intra-European
integration processes will be harmful to the international competitive
strength
of the entire
In the light of all these aspects, there
are indications that a European Union of "two velocities" will
emerge, whereby a core of countries will mainly pursue the objective to
strengthen their international competitiveness, while the remaining
members
will be struggling to accomplish an economic catch-up process to
intra-European
standards.
JEL: F02, O11
Markus Balzat, University of Augsburg, Department of Economics, Universitätsstr. 16, D-86159 Augsburg, Phone +49-821-598-4179, Fax +49-821-598-4229