The Political Economy of Regional Integration Projects at Borders where Poor and Rich Meet: The Role of Cross-Border Shopping and Community Sorting

At borders between poor and rich countries huge service price differentials could be exploited to mutual benefit offering better-paid job opportunities to the poor as well as better shopping opportunities to the rich However cross-border shopping is often limited by the substantial transaction costs of crossing the border Moreover countries and regions frequently fail to cut these transaction costs even when they have the opportunity to do so We provide a politico-economic analysis of cross-border integration projects More specifically we show how the political outcome depends on (i) intra-country mobility (ii) decision making and housing ownership regimes and (iii) federal grants and international border regulations Our analysis builds on two key characteristics in which individuals differ interregional mobility and intercultural ability (C) 2010 Elsevier Inc All rights reserved