Bring Together What Belongs Together. The Case of Divided Cities in Europe

Do spatial concentrations of economic activities have deep historical roots in Europe? This paper explores a unique quasi-natural experiment of opening borders within cities that were historically a single urban entity and were divided due to border shifts following major historical conflicts. After inter-city borders were opened, I find that local economic activities, measured by remotely sensed nightlight, became more concentrated close to the pre-division city centers. This raises an important question, what type of border opening is more important in spurring agglomeration, the free movement of goods or of people? When looking into potential mechanisms behind the impact, using national business register databases, I find that proximity to former historical centers is more prominent, particularly after allowance of the free movement of people as a part of the Schengen agreement in 2008, whereas gaining broader market access following the 2004 EU enlargement is less important. I account for two main channels. First, I show that firms in the consumption sectors are more exposed to the free movement of people and are more likely to start operating closer to historical city centers than are firms in the production sectors, which are less affected by local market potentials. Second, I show that cities in which cultural and language differences are not barriers to cross-border cooperation are more influenced by the free movement of people than cities where these barriers still exist. Hence, spatial agglomerations near pre-division city centers are more apparent in almost borderless cities.

Checkmate! Losing with Borders, Winning with Centers. The Case of European Integration

This paper studies two major stages of European integration, the expansion of the European Union (EU) in 2004 and the Schengen Area in 2008, and their impacts on economic performance in subregions of Central and Eastern European (CEE) countries. Using European regional data at the NUTS3 level and disaggregated synthetic control method, I construct counterfactuals for sub-regions of CEE countries. This approach allows me to assess regional treatment effects (RTEs) and to study the heterogeneous effects of European integration. I find that the benefits of EU and Schengen memberships to annual GDP per capita are approximately 10% less in border regions, relative to interior areas. The results expose regional economic disparities, as border regions lose relative to interior regions since European integration. Furthermore, integration facilitators in border regions such as fewer geographical barriers, more service employment, and positive attitudes toward the EU did not reduce economic disparities. The results show that the gap persists, regardless of some complementarities. Thus, the main implication of this paper is that sub-regions of CEE countries are far from being fully converged, and that European integration instead seems to have spurred sub-regional divergence.

Europe, we have a problem! The Economic Cost of Border Controls during COVID-19

It has been almost a quarter-century since the Schengen Area was founded in 1995. Since then, there have been no such tight restrictions on internal borders as during the COVID-19 pandemic in Europe. Since a pandemic is a present- time shock, evaluating the socioeconomic impact is limited. To overcome this challenge, I use an unconventional data source, NASA’s Black Marble Nighttime Lights (NTL) products, to measure the potential economic cost of controlling European borders. I have constructed a novel geo-coded NTL dataset spanning the pre-and post-periods of introducing border controls in European municipalities. This study demonstrates that remotely sensed monthly NTL intensity decreased in border regions after the imposing of border controls compared to the interior areas. I found that border restrictions had heterogeneous effects. The decline in NTL radiance in border municipalities compared to interiors is approximately 4% larger in New Member States (East) than in Old Member States (West). Moreover, using a cross-border (CB) cooperation survey which was conducted in 2020, I introduce municipality-type subgroups which explain the main channels of severe decline in NTL in border regions after imposing border controls. I expect that if residents oftentimes travel abroad, commute to neighboring border regions, reside in large cities, and are skilled workers, such border regions lose the most from COVID-19-induced border restrictions. Moreover, for respondents who commute to foreign cross-border regions because of leisure or work, or shopping, the decline in NTL should be major in the cross-border regions where they would commute under “normal” situations.