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A referendum on whether or not the UK remains a full-fledged member of the EU will take place before the end of 2017. It puts the European project at a crossroads. On the one hand, the UK is a major economic and political power so one expects current members will do their best to avoid a ‘Brexit’. On the other, no country has ever left the Union hence one may expect the EU to react with harsh post-exit conditions in order to discourage potential followers.
A clear indication that Europe is at a crossroad is that one tabled policy option is the establishment of different types of membership. [...] The difference between associate and full membership corresponds to what economists call shallow and deep integration – the former means purely economic, while the latter involves both economic and political integration. Differentiated memberships would entail a ‘two-speed Europe’ (Bagehot 2011).
This column takes the suggestion of differentiated EU memberships seriously and presents new econometric evidence comparing net benefits from these two options.
Norway and the EU
The EU-Norway relationship shows it is possible for a country to be economically associated to and, at the same time, politically disassociated from the EU. One important yet difficult question is of course whether this ‘economic only’ type of membership is superior to the ‘economic plus political’ type enjoyed by the 28 full EU members. Disentangling the net benefits of such integration is embroiled with difficulties and has not, to the best of our knowledge, been attempted previously.