Effects of (dis-)integrations at the Austrian-Czech Border

Since the beginning of the 20th century the Austrian-Czech border region has been exposed to recurrent large-scale and unforeseen episodes of economic integration and disintegration. This includes: the separation of the Austro-Hungarian empire and formation of a Czechoslovak state (in 1919), the establishment of the iron curtain (after 1948), the fall of the iron curtain (in 1989), Czech accession to the EU (in 2004) and the end of the derogation periods with respect to the freedom of movement and trade of services within the EU (in 2011). As a consequence the Austrian-Czech border region provide a rich testing ground to analyze the impact of (dis-)integration of economies with large income differential on regional development, that have been a recurrent topic in many policy debates related to the regional impact of globalization and European integration. The current project will use these rich experiences to test economic theories of (dis -)integration and to through this inform policy makers and the public debate on the regional impact of potential future economic integration and globalization in the future. One important innovative aspect of the project is that the historic experiences analyzed involved countries characterized by rather different political regimes and huge and widely varying differences in incomes and costs as well as a wide range of different regions. Thus for instance in 1919 todays Czech Republic was more highly developed than Austria, while in 1989 the opposite was the case. Similarly the regions located near the border include a large set of peripheral-rural regions as well as the urban centers of Brno and Vienna. We therefore expect that the results of the richness of the regions involved and the (dis-)integration episodes analyzed will allow for a highly differentiated picture of the effects of economic (dis-)integration on regional economies. As a further innovative aspect, the project will also address some of the methodological problems facing this literature by using data at an unusually low level of regional aggregation (which for part of the analysis will be a 250x250 meter grid). This will allow for an assessment of the potential measurement error resulting from regional aggregation that has been an issue in much of the previous literature.

This project uses the rich historic experience with large-scale and unforeseen episodes of economic integration and disintegration in the Austrian Czech border region (e.g., the separation of the Austro-Hungarian empire (in 1919), the establishment (after 1948) and the fall (in 1989) of the Iiron Ccurtain ) to test predictions of theories of regional development and political economy. In the paper entitled "Borders and Population Growth: Evidence from a Century of Border Regime Changes on the Austrian-Czech Border" we analyze the impacts of three major unexpected border regime changes that occurred during the course of 20th century on population growth along the Austrian-Czech border from a cross -border perspective. Using municipal-level census data reaching back to 1880, both for the Czech as well as the Austrian border region, we find no effects of the dissolution of the Austro-Hungarian Empire (1919) but strong and oppositely signed effects of the drawing (1948) and the fall (1989) of the Iron Curtain in both countries. Border regimes changes also affected population growth via economic as well as non-economic mechanisms, were limited to municipalities to a distance of 30 kilometers from the border and (in the Austrian case) effects are larger in municipalities with good infrastructure connections. In the paper entitled "The impact of market potential and competition on regional enterprise creation: Evidence from the fall of the Iron Curtain", we analyze the impact of changes in market access and competition due to the fall of the Iron curtain on new enterprise formation in the retail trade market of the Austrian and Czech border region. We find a substantial impact on new enterprise creation of private-sector retailers in the Czech Republic, but little evidence of adverse effects in the Austrian border municipalities. These findings may, however, also be interesting in a wider policy context, as private sector development is also often a main objective of market-oriented reform programs in other countries. Our results point to a complementarity between the objectives of liberalizing cross-border exchange and private sector development. In the paper "Does Democracy Flourish in the Dark? Regional Development and Democracy Building" we exploit the variation in relative economic development of the Czech municipalities create by the integration after the fall of the Iron Curtain to examine the causal link between economic development and democratization. We find that economic development increases political participation (i.e.voter turnout in parliamentary elections). It is also associated with increased support for pro-system, pro-democratic parties. Conversely, we find no effect of regional development on the electoral support for the direct successor of the pre-1989 Communist Party. This suggests that while regional development may mitigate anti-system sentiment, it does not eliminate nostalgia for the fallen autocratic regime.