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The Eastern Enlargement of the Eurozone and Labour Market Adjustment

Author

Listed:
  • Jaakko Kiander

    (Government Institute for Economic Research (VATT) Helsinki)

  • Risto Vaittinen

    (Government Institute for Economic Research (VATT) Helsinki)

  • Tiiu Paas

    (Institute of Economics, University of Tartu)

Abstract

This paper analyses the economic effects of the eastern enlargement of the EU both on the existing Member States and the candidate countries using simulation results of a dynamic computable general equilibrium model. In addition to conventional trade policy impacts such as custom union formation and common agricultural policy the effects of factor mobility, induced by institutional changes, are analyzed. The analysis is based on six different scenarios. According to the results EU membership will accelerate growth in output, investment and consumption in the candidate countries in all scenarios. However, it turns out that factor mobility effects dominate those of conventional trade policy. Growth in national income will lag behind GDP growth because profits will be paid out to foreign investors. Migration will slow output growth in the candidate countries and accelerate growth in the existing Member States, while the trends in per capita consumption will be reversed; migration increases per capita consumption in the new Member States and reduces it slightly in the existing ones.

Suggested Citation

  • Jaakko Kiander & Risto Vaittinen & Tiiu Paas, 2002. "The Eastern Enlargement of the Eurozone and Labour Market Adjustment," Eastward Enlargement of the Euro-zone Working Papers wp06, Free University Berlin, Jean Monnet Centre of Excellence, revised 01 Aug 2002.
    • Handle: RePEc:ezo:ezppap:wp06
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    File URL: http://www.ezoneplus.org/archiv/ezoneplus_wp_six.pdf
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    References listed on IDEAS

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    4. Vaittinen, Risto, 2000. "Eastern Enlargement of the European Union - Transition in applicant countries and evaluation of the economic prospects with a dynamic CGE-model," Research Reports 64, VATT Institute for Economic Research.
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    Cited by:

    1. Hanns-Dieter Jacobsen et. al, 2004. "Economic, Political, Institutional as well as Social Risks and Opportunities of EMU Enlargement," Eastward Enlargement of the Euro-zone Working Papers wp22, Free University Berlin, Jean Monnet Centre of Excellence, revised 01 Jun 2004.
    2. K. B. Usha, 2014. "Social Consequences of Neoliberal Economic Crisis and Austerity Policy in the Baltic States," International Studies, , vol. 51(1-4), pages 72-100, January.

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    More about this item

    Keywords

    Eastern enlargement of the EU; General equilibrium modeling; Integration; Migration; Trade policy;
    All these keywords.

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • F10 - International Economics - - Trade - - - General
    • F15 - International Economics - - Trade - - - Economic Integration
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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