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Growth Effects of EU Expansion: A Penalized Synthetic Control Method

Author

Listed:
  • Makram El-Shagi

    (Center for Financial Development and Stability at Henan University, and School of Economics at Henan University, Kaifeng, Henan)

  • Steven Yamarik

    (Department of Economics, California State University Long Beach, CA)

Abstract

This paper applies a penalized synthetic control method to estimate the growth effects of European Union (EU) enlargement. A penalized synthetic control estimator introduces a penalty term in the synthetic matching algorithm that penalizes discrepancies between the treated economy and its synthetic counterpart. We use this estimator to construct counterfactuals of the growth rate of GDP per capita for the EU accession countries. Standard synthetic control results show that a country’s accession into the EU generates an almost uniform positive impact on the level of real GDP per capita. However, by applying the penalized synthetic control estimator to the growth rate, we find that most of these positive effects become insignificant and some even become negative.

Suggested Citation

  • Makram El-Shagi & Steven Yamarik, 2023. "Growth Effects of EU Expansion: A Penalized Synthetic Control Method," CFDS Discussion Paper Series 2023/4, Center for Financial Development and Stability at Henan University, Kaifeng, Henan, China.
    • Handle: RePEc:fds:dpaper:202304
    as

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    File URL: http://cfds.henuecon.education/images/dpaper/WP_4_2023_Growth_EU_Expansion.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    synthetic control matching; treatment effect; European Union; expansion; growth;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • F15 - International Economics - - Trade - - - Economic Integration
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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