The increasing integration of national markets, facilitated through deregulation and technological progress, has changed the economic landscape. Emerging countries account for an increasing share of world production, relative prices of capital and labour have shifted, and interest rates and inflation rates are comparatively low, while prices for energy have surged. Shifts in the relative earnings of capital and labour are particularly troubling for labour market performance in developed countries. Growing disparities in income or — in many continental European countries — persistent unemployment are often attributed to the increasing integration of the world economy.
As a consequence of these processes, policymakers are facing a difficult task. On one hand, policymakers are under increasing pressure to alleviate the costs of the globalisation process. On the other hand, they are urged to assist sectors, regions, firms, and individuals to exploit the benefits of the internationalisation process. Understanding the costs and benefits of globalisation and finding appropriate policy responses require a good understanding of how the integration process affects firms and workers at the regional level as well as the micro level. We study different channels of international integration: trade, capital flows and FDI, and migration. Surprisingly little is yet known about the regional and micro effects of international integration.
Situated in Baden-Wuerttemberg, a German federal state with a high degree of international integration and home to some of the most well-known German exporters and multinational enterprises, the IAW disperses unique knowledge and experience in the fundamentals of regional development. In addition to addressing the effects of increasing international integration on the performance of firms and regions, we also investigate whether and how characteristics of regions (such as economic structure or institutions) may influence internationalisation.
Another area of research by the IAW in regional economics examines the dynamics and evolution of regional economic structure, including, for example, analyses of firms’ location choices, firm dynamics, spin-offs, and other mechanisms. Furthermore, the analysis of regional mobility of workers has a productive link with the research area of Labour Markets and Social Security.