Regional Policies and EU Enlargement
AbstractTaking 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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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 3744.
Date of creation: Feb 2003
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Find related papers by JEL classification:
- H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
- O10 - Economic Development, Technological Change, and Growth - - Economic Development - - - General
- R10 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2003-03-14 (All new papers)
- NEP-DEV-2003-03-14 (Development)
- NEP-EEC-2003-03-14 (European Economics)
- NEP-GEO-2003-03-14 (Economic Geography)
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