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Can a Wealthy Economy Gain from an EU Membership? Adjustment Costs and Long Term Welfare Effects of Full Integration—The Norwegian Case

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  • Einar Bowitz

    ()

  • Taran Fæhn
  • Leo Grünfeld
  • Knut Moum
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    Abstract

    We employ a large scale macroeconometric model to study adjustment problems and long term welfare effects of a Norwegian EU-membership. Accession costs depend significantly on the country's level of GDP, the size of its agricultural sector and tariff and VAT revenues as these elements determine the net membership contribution. Without the transfers, integrating the economy into EU generates a small welfare gain. This result is strongly affected by a long period with under-utilisation of resources. With the net contribution included, we identify a welfare loss. This is especially so if fiscal policy is changed to maintain the public sector budgetary balance. Copyright Kluwer Academic Publishers 1997

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    File URL: http://hdl.handle.net/10.1023/A:1008286630510
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    Bibliographic Info

    Article provided by Springer in its journal Open Economies Review.

    Volume (Year): 8 (1997)
    Issue (Month): 3 (July)
    Pages: 211-231

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    Handle: RePEc:kap:openec:v:8:y:1997:i:3:p:211-231

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    Web page: http://www.springerlink.com/link.asp?id=100323

    Related research

    Keywords: economic integration; EU participation; macroeconometric modelling;

    References

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    1. Ari Kokko, 1994. "Sweden: Effects of EU Membership on Investment and Growth," The World Economy, Wiley Blackwell, vol. 17(5), pages 667-677, 09.
    2. Gabrielle Antille & Marc Bacchetta & Fabrizio Carlevaro & Tobias Müller & Nicolas Schmitt, 1993. "Switzerland and the European Economic Area: A General Equilibrium Assessment of Some Measures of Integration," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 129(IV), pages 643-672, December.
    3. Mercenier, J. & Akitoby, B., 1994. "On Intertemporal General-Equilibrium Reallocation Effects of Europe's Move to a Single Market," Cahiers de recherche 9401, Universite de Montreal, Departement de sciences economiques.
    4. Miller, Marcus H & Spencer, John E, 1977. "The Static Economic Effects of the UK Joining the EEC: A General Equilibrium Approach," Review of Economic Studies, Wiley Blackwell, vol. 44(1), pages 71-93, February.
    5. Flam, Harry & Nordström, Håkan, 1995. "Why do Pre-tax Car Prices Differ so Much Across European Countries?," CEPR Discussion Papers 1181, C.E.P.R. Discussion Papers.
    6. Keuschnigg, Christian & Kohler, Wilhelm, 1995. "Dynamic Effects of Tariff Liberalization: An Intertemporal CGE Approach," Review of International Economics, Wiley Blackwell, vol. 3(1), pages 20-35, February.
    7. Flam, H. & Nordstrom, H., 1995. "Why Do Pre-Tax Prices Differ so Much Across European Countries?," Papers 591, Stockholm - International Economic Studies.
    8. Jan I. Haaland, 1994. "Norway: The Trade Effects of European Integration," The World Economy, Wiley Blackwell, vol. 17(5), pages 683-695, 09.
    9. Winters, L. Alan, 1992. "European Trade and Welfare after `1992'," CEPR Discussion Papers 678, C.E.P.R. Discussion Papers.
    10. Capros, Pantelis & Karadeloglou, Pavlos & Mentzas, Gregory, 1991. "Market imperfections in a general equilibrium framework : An empirical analysis," Economic Modelling, Elsevier, vol. 8(1), pages 116-128, January.
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