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Regional Policies and EU Enlargement

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  • Boldrin, Michele
  • Canova, Fabio

Abstract

Taking both the enlargement process, as currently defined by the EU, and the structural funds as a given, this Paper examines what is the best way for candidate countries to fuel real convergence. The experience from earlier EU enlargements and current economic conditions within the CEEC10 suggest that placing too high expectations on enlargement per se would be misplaced. Further, regional transfers taking place under the structural and cohesion policies are unlikely to become the growth engines of the CEEC10. They may increase income in the receiving countries by an amount equal to the one transferred, but there is no evidence they will have an impact on long-run growth rates. To achieve long-run growth at rates higher than average an appropriate mix of European and national policies is needed. This includes further fostering of trade integration within the EU, restructuring public spending, creation of supply side incentives by proper reforms of fiscal and social insurance policies, free movement of capital and labour, together with a competitive level of labour income taxation. Based on historical experience two types of policies appear to be particularly relevant. First, public programs for long-term income support, corporate subsidies and other forms of income transfer have negative effect on economic growth. We believe they should be terminated as soon as possible. Second, labour and capital mobility are good for growth and economic convergence. In particular, the adoption or continuation of various transfer and/or regulation policies aimed at eliminating labour migration from the CEEC is wrong and damaging. The fear of migration has been magnified by skillful politicians: migrations in past enlargements have been small. There is no reason to expect it to be large in this case.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 3744.

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Date of creation: Feb 2003
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Handle: RePEc:cpr:ceprdp:3744

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Keywords: convergence; labour and capital mobility; regional policies; structural funds;

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  1. Canova, Fabio & Ravn, Morten O., 1998. "The Macroeconomic Effects of German Unification: Real Adjustments and the Welfare State," CEPR Discussion Papers 2038, C.E.P.R. Discussion Papers.
  2. Hans-Werner Sinn, 2000. "Germany's Economic Unification. An Assessment after Ten Years," CESifo Working Paper Series 247, CESifo Group Munich.
  3. Franz, Wolfgang & Steiner, Viktor, 1999. "Wages in the East German transition process: facts and explanations," ZEW Discussion Papers 99-40, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  4. Michele Boldrin & Fabio Canova, 2001. "Inequality and convergence in Europe's regions: reconsidering European regional policies," Economic Policy, CEPR & CES & MSH, vol. 16(32), pages 205-253, 04.
  5. Sjef Ederveen & Henri L .F. Groot & Richard Nahuis, 2006. "Fertile Soil for Structural Funds?A Panel Data Analysis of the Conditional Effectiveness of European Cohesion Policy," Kyklos, Wiley Blackwell, vol. 59(1), pages 17-42, 02.
  6. Pietro Garibaldi & Nada Mora & Ratna Sahay & Jeromin Zettelmeyer, 2001. "What Moves Capital to Transition Economies?," IMF Staff Papers, Palgrave Macmillan, vol. 48(4), pages 6.
  7. Ronald W. Jones, 2000. "Globalization and the Theory of Input Trade," MIT Press Books, The MIT Press, edition 1, volume 1, number 026210086x, December.
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