The paper studies the role of international implications after EU enlargement. Based on a formal model with migration costs for both capital and labor, it predicts a two-sided migration from the new to the old EU countries which is later reversed. As the migration pattern chosen by market forces turns out to be effici e nt, migration should not be artificially reduced by means of legal constraints or subsidies to the new member countries. The paper draws the parallel with German unification and points out the lessons to be learned by Europe. The analysis concludes with a brief discussion of the second best problem posed by the existence of welfare states in the old member countries.
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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number
CESifo Working Paper No. 182.
Find related papers by JEL classification: F15 - International Economics - - Trade - - - Economic Integration F22 - International Economics - - International Factor Movements and International Business - - - International Migration H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
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