This paper takes a welfare-view on eastern enlargement of the EU, focusing on incumbent countries. Enlargement is decomposed into three elements: Single-market integration on commodity markets, budgetary costs from EU-expenditure policies, and single-market-induced migration from new to present member countries. I first use an analytical model to derive a welfare equation that identifies the principle channels for incumbent country welfare gains and losses from enlargement, including product differentiation, capital accumulation, and unemployment due to search-costs. I then propose a method that allows to extend welfare results obtained from a detailed calibrated version of this model for Germany to other incumbent countries. The approach relies on model elasticities extracted from the German model which are then applied to other countries’ idiosyncratic "enlargement-shocks". Constructing detailed indices for such country-specific "enlargement shocks", I arrive at a characteristic inter-country pattern of enlargement-induced welfare effects for all EU15 countries. Aggregating these across countries reveals enlargement to be beneficial for the union as a whole, although several countries stand to suffer welfare losses.
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Paper provided by Department of Economics, Johannes Kepler University Linz, Austria in its series Economics working papers with number
2003-16.
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Baldwin, Richard E. & Venables, Anthony J., 1995.
"Regional economic integration,"
Handbook of International Economics,
in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 31, pages 1597-1644
Elsevier.
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