IDEAS home Printed from https://ideas.repec.org/p/tiu/tiutis/00707b03-c11e-40ab-877f-a0990bf43064.html
   My bibliography  Save this paper

EU Accession and Income Growth : An Empirical Approach

Author

Listed:
  • Lejour, (Arjan Marcel)

    (Tilburg University, School of Economics and Management)

  • Solanic, Vladimir
  • Tang, (Paul Johannes George)

    (Tilburg University, School of Economics and Management)

Abstract

The dynamic effects from EU membership are crucial for the new member states to catch up with the average income level in the old member states. To gauge the dynamic effects, we follow a two-step procedure in which a gravity equation for bilateral trade shows the trade effect of EU membership and a growth regression yields the income effect of trade. Shared EU membership is found to increase trade between two of its member states with about 34%. EU membership may contribute to trade by inducing countries to improve the quality of their institutions. Trade increases by another 22% if institutions improve, yielding a total trade increase of 56%. Improved openness increases income by 37.5% according to our estimates. Adding a small direct effect of improved institutions on income, the total income effect of EU membership is 39% for the ten new members. This implies that EU membership, or its effect on trade and institutions, could lead to large economic gains for the new member states, but does not bring them economically on par with the old member states.
(This abstract was borrowed from another version of this item.)
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Lejour, (Arjan Marcel) & Solanic, Vladimir & Tang, (Paul Johannes George), 2006. "EU Accession and Income Growth : An Empirical Approach," Other publications TiSEM 00707b03-c11e-40ab-877f-a, Tilburg University, School of Economics and Management.
    • Handle: RePEc:tiu:tiutis:00707b03-c11e-40ab-877f-a0990bf43064
    as

    Download full text from publisher

    File URL: https://pure.uvt.nl/ws/portalfiles/portal/19109883/eu_accession_and_income_growth_empirical_approach.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Harald Badinger, 2005. "Growth Effects of Economic Integration: Evidence from the EU Member States," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 141(1), pages 50-78, April.
    2. Rachel Griffith & Stephen Redding & John Van Reenen, 2004. "Mapping the Two Faces of R&D: Productivity Growth in a Panel of OECD Industries," The Review of Economics and Statistics, MIT Press, vol. 86(4), pages 883-895, November.
    3. Coe, David T. & Helpman, Elhanan, 1995. "International R&D spillovers," European Economic Review, Elsevier, vol. 39(5), pages 859-887, May.
    4. Jan Fidrmuc & Jarko Fidrmuc, 2003. "Disintegration and Trade," Review of International Economics, Wiley Blackwell, vol. 11(5), pages 811-829, November.
    5. Patrick Vanhoudt, 1999. "Did the European unification induce economic growth? In search of scale effects and persistent changes," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 135(2), pages 193-220, June.
    6. Maurel, Mathilde & Koukhartchouk, Oxana, 2003. "Accession to the WTO and EU Enlargement: What Potential for Trade Increase?," CEPR Discussion Papers 3944, C.E.P.R. Discussion Papers.
    7. David E. Bloom & Jeffrey D. Sachs, 1998. "Geography, Demography, and Economic Growth in Africa," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 29(2), pages 207-296.
    8. Jesus Crespo Cuaresma & Doris Ritzberger-Grunwald & Maria Antoinette Silgoner, 2008. "Growth, convergence and EU membership," Applied Economics, Taylor & Francis Journals, vol. 40(5), pages 643-656.
    9. David H. Romer & Jeffrey A. Frankel, 1999. "Does Trade Cause Growth?," American Economic Review, American Economic Association, vol. 89(3), pages 379-399, June.
    10. Henri L. F. De Groot & Gert‐Jan Linders & Piet Rietveld & Uma Subramanian, 2004. "The Institutional Determinants of Bilateral Trade Patterns," Kyklos, Wiley Blackwell, vol. 57(1), pages 103-123, February.
    11. Easterly, William & Levine, Ross, 2003. "Tropics, germs, and crops: how endowments influence economic development," Journal of Monetary Economics, Elsevier, vol. 50(1), pages 3-39, January.
    12. Fritz Breuss, 2001. "Makroökonomische Auswirkungen der EU-Erweiterung auf alte und neue Mitglieder," WIFO Monatsberichte (monthly reports), WIFO, vol. 74(11), pages 655-666, November.
    13. Irwin, Douglas A. & Tervio, Marko, 2002. "Does trade raise income?: Evidence from the twentieth century," Journal of International Economics, Elsevier, vol. 58(1), pages 1-18, October.
    14. Levine, Ross & Renelt, David, 1992. "A Sensitivity Analysis of Cross-Country Growth Regressions," American Economic Review, American Economic Association, vol. 82(4), pages 942-963, September.
    15. Edwards, Sebastian, 1998. "Openness, Productivity and Growth: What Do We Really Know?," Economic Journal, Royal Economic Society, vol. 108(447), pages 383-398, March.
    16. Brenton, Paul & Gros, Daniel, 1997. "Trade Reorientation and Recovery in Transition Economies," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 13(2), pages 65-76, Summer.
    17. repec:umd:umdeco:rodriguez9901 is not listed on IDEAS
    18. Francisco L. Rivera-Batiz & Luis A. Rivera-Batiz, 2018. "Economic Integration and Endogenous Growth," World Scientific Book Chapters, in: Francisco L Rivera-Batiz & Luis A Rivera-Batiz (ed.), International Trade, Capital Flows and Economic Development, chapter 1, pages 3-32, World Scientific Publishing Co. Pte. Ltd..
    19. Daron Acemoglu & Simon Johnson & James A. Robinson, 2001. "The Colonial Origins of Comparative Development: An Empirical Investigation," American Economic Review, American Economic Association, vol. 91(5), pages 1369-1401, December.
    20. Jeffrey D. Sachs, 2001. "Tropical Underdevelopment," NBER Working Papers 8119, National Bureau of Economic Research, Inc.
    21. Fritz Breuss, 2001. "Macroeconomic Effects of EU Enlargement for Old and New Members," WIFO Working Papers 143, WIFO.
    22. William Easterly, 2002. "The Elusive Quest for Growth: Economists' Adventures and Misadventures in the Tropics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262550423, December.
    23. Henrekson, Magnus & Torstensson, Johan & Torstensson, Rasha, 1997. "Growth effects of European integration," European Economic Review, Elsevier, vol. 41(8), pages 1537-1557, August.
    24. Coe, David T & Helpman, Elhanan & Hoffmaister, Alexander W, 1997. "North-South R&D Spillovers," Economic Journal, Royal Economic Society, vol. 107(440), pages 134-149, January.
    25. Arjan Lejour & Vladimir Solanic & Paul Tang, 2009. "EU Accession and Income Growth: An Empirical Approach," Transition Studies Review, Springer;Central Eastern European University Network (CEEUN), vol. 16(1), pages 127-144, May.
    26. Francisco Rodríguez & Dani Rodrik, 2001. "Trade Policy and Economic Growth: A Skeptic's Guide to the Cross-National Evidence," NBER Chapters, in: NBER Macroeconomics Annual 2000, Volume 15, pages 261-338, National Bureau of Economic Research, Inc.
    27. Edwards, Sebastian, 1993. "Openness, Trade Liberalization, and Growth in Developing Countries," Journal of Economic Literature, American Economic Association, vol. 31(3), pages 1358-1393, September.
    28. Jeffrey Frankel & Andrew Rose, 2002. "An Estimate of the Effect of Common Currencies on Trade and Income," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 117(2), pages 437-466.
    29. Robert E. Hall & Charles I. Jones, 1999. "Why do Some Countries Produce So Much More Output Per Worker than Others?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 114(1), pages 83-116.
    30. World Bank, 2003. "World Development Indicators 2003," World Bank Publications - Books, The World Bank Group, number 13920, December.
    31. Jansen, Marion & Nordås, Hildegunn Kyvik, 2004. "Institutions, trade policy and trade flows," WTO Staff Working Papers ERSD-2004-02, World Trade Organization (WTO), Economic Research and Statistics Division.
    32. N. Gregory Mankiw & David Romer & David Weil, 1990. "A Contribution to the Empirics of Economic Growth," Working Papers 1990-24, Brown University, Department of Economics.
    33. Dollar, David, 1992. "Outward-Oriented Developing Economies Really Do Grow More Rapidly: Evidence from 95 LDCs, 1976-1985," Economic Development and Cultural Change, University of Chicago Press, vol. 40(3), pages 523-544, April.
    34. Deardoff, A.V. & Brown, D.K. & Stern, R.M. & Djankov, S.D., 1995. "An Economic Assessment of the Integration of Czechoslovakia, Hungary, and Poland into the Europan Union," Working Papers 380, Research Seminar in International Economics, University of Michigan.
    35. Crafts, Nicholas & Kaiser, Kai, 2004. "Long-term growth prospects in transition economies: a reappraisal," Structural Change and Economic Dynamics, Elsevier, vol. 15(1), pages 101-118, March.
    36. Andrew K. Rose, 2004. "Do We Really Know That the WTO Increases Trade?," American Economic Review, American Economic Association, vol. 94(1), pages 98-114, March.
    37. Smith, Alasdair & Venables, Anthony J., 1988. "Completing the internal market in the European Community : Some industry simulations," European Economic Review, Elsevier, vol. 32(7), pages 1501-1525, September.
    38. Bergstrand, Jeffrey H, 1985. "The Gravity Equation in International Trade: Some Microeconomic Foundations and Empirical Evidence," The Review of Economics and Statistics, MIT Press, vol. 67(3), pages 474-481, August.
    39. Jaime De Melo & Arvind Panagariya & Dani Rodrik, 2015. "The New Regionalism: A Country Perspective," World Scientific Book Chapters, in: Developing Countries in the World Economy, chapter 14, pages 323-357, World Scientific Publishing Co. Pte. Ltd..
    40. Stephen Knack & Philip Keefer, 1995. "Institutions And Economic Performance: Cross‐Country Tests Using Alternative Institutional Measures," Economics and Politics, Wiley Blackwell, vol. 7(3), pages 207-227, November.
    41. Asli Demeirgüç-Kunt & Ross Levine (ed.), 0. "Finance and Growth," Books, Edward Elgar Publishing, number 17119.
    42. N. Gregory Mankiw & David Romer & David N. Weil, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(2), pages 407-437.
    43. Arjan Lejour & Ruud de Mooij & Richard Nahuis, 2001. "EU enlargement: economic implications for countries and industries," CPB Document 11, CPB Netherlands Bureau for Economic Policy Analysis.
    44. Black,Stanley W., 2008. "Europe's Economy Looks East," Cambridge Books, Cambridge University Press, number 9780521088237.
    45. Beck, Thorsten & Levine, Ross & Loayza, Norman, 2000. "Finance and the sources of growth," Journal of Financial Economics, Elsevier, vol. 58(1-2), pages 261-300.
    46. Richard E. Baldwin & Joseph F. Francois & Richard Portes, 1997. "The costs and benefits of eastern enlargement: the impact on the EU and central Europe," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 12(24), pages 125-176.
    47. repec:onb:oenbwp:y::i:62:b:1 is not listed on IDEAS
    48. T.N. Srinivasan & Jessica Seddon Wallack, 2004. "Globalization, Growth, and the Poor," De Economist, Springer, vol. 152(2), pages 251-272, June.
    49. Nazrul Islam, 1995. "Growth Empirics: A Panel Data Approach," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 110(4), pages 1127-1170.
    50. Anderson, James E, 1979. "A Theoretical Foundation for the Gravity Equation," American Economic Review, American Economic Association, vol. 69(1), pages 106-116, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Bas Straathof & Gert Jan Linders & Arjan Lejour & Jan Möhlmann, 2008. "The internal market and the Dutch economy: implications for trade and economic growth," CPB Document 168, CPB Netherlands Bureau for Economic Policy Analysis.
    2. Arjan Lejour & Andrea Mervar & Gerard Verweij, 2007. "The Economic Effects of Croatia's Accession to the EU," Working Papers 0705, The Institute of Economics, Zagreb.
    3. Chowdhury, Md Shahedur R. & Khraiche, Maroula & Boudreau, James W., 2023. "Corruption and stock market development: Developing vs. developed economies," International Review of Financial Analysis, Elsevier, vol. 89(C).
    4. Arjan Lejour & Vladimir Solanic & Paul Tang, 2009. "EU Accession and Income Growth: An Empirical Approach," Transition Studies Review, Springer;Central Eastern European University Network (CEEUN), vol. 16(1), pages 127-144, May.
    5. Arjan Lejour & Andrea Mervar & Gerard Verweij, 2007. "The Economic Effects of Croatia's Accession to the EU," Working Papers 0705, The Institute of Economics, Zagreb.
    6. Péter Halmai & Viktória Vásáry, 2010. "Real convergence in the new Member States of the European Union (Shorter and longer term prospects)," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 7(1), pages 229-253, June.
    7. Billmeier, Andreas & Massa, Isabella, 2009. "What drives stock market development in emerging markets--institutions, remittances, or natural resources?," Emerging Markets Review, Elsevier, vol. 10(1), pages 23-35, March.
    8. Péter Halmai & Viktória Vásáry, 2012. "Convergence crisis: economic crisis and convergence in the European Union," International Economics and Economic Policy, Springer, vol. 9(3), pages 297-322, September.
    9. Mr. Andreas Billmeier & Miss Isabella Massa, 2007. "What Drives Stock Market Development in the Middle East and Central Asia—Institutions, Remittances, or Natural Resources?," IMF Working Papers 2007/157, International Monetary Fund.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Arjan Lejour & Vladimir Solanic & Paul Tang, 2009. "EU Accession and Income Growth: An Empirical Approach," Transition Studies Review, Springer;Central Eastern European University Network (CEEUN), vol. 16(1), pages 127-144, May.
    2. Bas Straathof & Gert Jan Linders & Arjan Lejour & Jan Möhlmann, 2008. "The internal market and the Dutch economy: implications for trade and economic growth," CPB Document 168, CPB Netherlands Bureau for Economic Policy Analysis.
    3. Capolupo, Rosa, 2009. "The New Growth Theories and Their Empirics after Twenty Years," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 3, pages 1-72.
    4. Mr. Andrew Berg & Anne O. Krueger, 2003. "Trade, Growth, and Poverty: A Selective Survey," IMF Working Papers 2003/030, International Monetary Fund.
    5. Mina Baliamoune-Lutz, 2007. "Entrepreneurship, Reforms, and Development: Empirical Evidence," ICER Working Papers 38-2007, ICER - International Centre for Economic Research.
    6. John Knight & Sai Ding, 2008. "Why has China Grown so Fast? The Role of Structural Change," Economics Series Working Papers 415, University of Oxford, Department of Economics.
    7. Yanikkaya, Halit, 2003. "Trade openness and economic growth: a cross-country empirical investigation," Journal of Development Economics, Elsevier, vol. 72(1), pages 57-89, October.
    8. Stimpfle, Alexander & Stadelmann, David, 2015. "The Impact of Fundamental Development Factors on Different Income Groups: International Evidence," VfS Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 113128, Verein für Socialpolitik / German Economic Association.
    9. Francisco Alcalá & Antonio Ciccone, 2004. "Trade and Productivity," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 119(2), pages 613-646.
    10. Mark Rogers, 2003. "A Survey of Economic Growth," The Economic Record, The Economic Society of Australia, vol. 79(244), pages 112-135, March.
    11. Eriṣ, Mehmet N. & Ulaṣan, Bülent, 2013. "Trade openness and economic growth: Bayesian model averaging estimate of cross-country growth regressions," Economic Modelling, Elsevier, vol. 33(C), pages 867-883.
    12. Katja Mann, 2015. "The EU, a Growth Engine? The Impact of European Integration on Economic Growth in Central Eastern Europe," FIW Working Paper series 136, FIW.
    13. Lucas Bretschger, 2003. "Growth in a Globalised Economy: The Effects of Capital Taxes and Tax Competition," CER-ETH Economics working paper series 03/24, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
    14. Yasir Khan & Attiya Yasmin Javid, 2015. "The Impact of Formal and Informal Institutions on Economic Performance: A Cross-Country Analysis," PIDE-Working Papers 2015:130, Pakistan Institute of Development Economics.
    15. Noguer, Marta & Siscart, Marc, 2005. "Trade raises income: a precise and robust result," Journal of International Economics, Elsevier, vol. 65(2), pages 447-460, March.
    16. Arvanitidis, Paschalis & Petrakos, George & Pavleas, Sotiris, 2007. "Determinants of economic growth: the experts’ view," Papers DYNREG20, Economic and Social Research Institute (ESRI).
    17. Bockstette, Valerie & Chanda, Areendam & Putterman, Louis, 2002. "States and Markets: The Advantage of an Early Start," Journal of Economic Growth, Springer, vol. 7(4), pages 347-369, December.
    18. Jakob B. Madsen, 2009. "Trade Barriers, Openness, and Economic Growth," Southern Economic Journal, John Wiley & Sons, vol. 76(2), pages 397-418, October.
    19. Bretschger, Lucas, 2001. "Taking two steps to climb onto the stage: Capital taxes as link between trade and growth," Wirtschaftswissenschaftliche Diskussionspapiere 05/2001, University of Greifswald, Faculty of Law and Economics.
    20. Rabah Arezki & Frederick van der Ploeg, 2011. "Do Natural Resources Depress Income Per Capita?," Review of Development Economics, Wiley Blackwell, vol. 15(3), pages 504-521, August.

    More about this item

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:tiu:tiutis:00707b03-c11e-40ab-877f-a0990bf43064. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Richard Broekman (email available below). General contact details of provider: https://www.tilburguniversity.edu/about/schools/economics-and-management/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.