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The Impact of EU Enlargement in 2004 and 2007 on FDI and Migration Flows Gravity Analysis of Factor Mobility

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Author Info

  • Andreas Breitenfellner

    ()
    (Oesterreichische Nationalbank)

  • Jesus Crespo Cuaresma

    ()
    (Oesterreichische Nationalbank)

  • Peter Mooslechner

    ()
    (Oesterreichische Nationalbank)

  • Doris Ritzberger-Grünwald

    ()
    (Oesterreichische Nationalbank)

Abstract

This paper contributes to the ex post assessment of macroeconomic effects triggered by the 2004 and 2007 wave of EU enlargement, with a specific focus on factor trade, i.e. the crossborder mobility of labor and capital. While most of the potential for trade in goods and for foreign direct investment (FDI) was tapped ahead of actual enlargement, above all migration effects are spread out over a longer period, given transition arrangements for labor market integration. We use (innovative) gravity models to establish the potential for factor trade and crosscheck the results against recent developments. Our key finding is the uneven development of capital and labor mobility since EU enlargement. While migration potentials are materializing as expected, FDI stocks have remained relatively stable at already high levels. Furthermore, we observe a nonlinear relationship between migration and per capita income that may be explained on theoretical grounds and attributed to institutional factors. While the highest-income countries (above all Slovenia and the Czech Republic) are already turning into immigration countries, the low-income countries and those last to join the EU (Bulgaria and Romania) are likely to see further emigration and more FDI inflows.

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File URL: http://www.oenb.at/dms/oenb/Publikationen/Volkswirtschaft/Monetary-Policy-and-the-Economy/2008/Monetary-Policy-and-the-Economy-Q2-08/chapters/mop_2008_2_analyses_5_tcm16-88559.pdf
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Bibliographic Info

Article provided by Oesterreichische Nationalbank (Austrian Central Bank) in its journal Monetary Policy & the Economy.

Volume (Year): (2008)
Issue (Month): 2 ()
Pages: 101–120

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Handle: RePEc:onb:oenbmp:y:2008:i:2:b:5

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Related research

Keywords: EU enlargement; factor trade; labor mobility; capital mobility; migration; foreign direct investment; gravity model;

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References

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  1. Eller, Markus & Haiss, Peter & Steiner, Katharina, 2006. "Foreign direct investment in the financial sector and economic growth in Central and Eastern Europe: The crucial role of the efficiency channel," Emerging Markets Review, Elsevier, vol. 7(4), pages 300-319, December.
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