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Can a Wealthy Economy Gain from an EU Membership? Adjustment Costs and Long Term Welfare Effects of Full Integration—The Norwegian Case

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  • Einar Bowitz

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  • Taran Fæhn
  • Leo Grünfeld
  • Knut Moum

Abstract

We employ a large scale macroeconometric model to study adjustment problems and long term welfare effects of a Norwegian EU-membership. Accession costs depend significantly on the country's level of GDP, the size of its agricultural sector and tariff and VAT revenues as these elements determine the net membership contribution. Without the transfers, integrating the economy into EU generates a small welfare gain. This result is strongly affected by a long period with under-utilisation of resources. With the net contribution included, we identify a welfare loss. This is especially so if fiscal policy is changed to maintain the public sector budgetary balance. Copyright Kluwer Academic Publishers 1997

Suggested Citation

  • Einar Bowitz & Taran Fæhn & Leo Grünfeld & Knut Moum, 1997. "Can a Wealthy Economy Gain from an EU Membership? Adjustment Costs and Long Term Welfare Effects of Full Integration—The Norwegian Case," Open Economies Review, Springer, vol. 8(3), pages 211-231, July.
  • Handle: RePEc:kap:openec:v:8:y:1997:i:3:p:211-231
    DOI: 10.1023/A:1008286630510
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    References listed on IDEAS

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    1. Jan I. Haaland, 1994. "Norway: The Trade Effects of European Integration," The World Economy, Wiley Blackwell, vol. 17(5), pages 683-695, September.
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    7. Jean Mercenier & Bernardin Akitoby, 1993. "On intertemporal general-equilibrium reallocation effects of Europe's move to a single market," Discussion Paper / Institute for Empirical Macroeconomics 87, Federal Reserve Bank of Minneapolis.
    8. Marcus H. Miller & John E. Spencer, 1977. "The Static Economic Effects of the UK joining the EEC: A General Equilibrium Approach," Review of Economic Studies, Oxford University Press, vol. 44(1), pages 71-93.
    9. Ari Kokko, 1994. "Sweden: Effects of EU Membership on Investment and Growth," The World Economy, Wiley Blackwell, vol. 17(5), pages 667-677, September.
    10. Gabrielle Antille & Marc Bacchetta & Fabrizio Carlevaro & Tobias Müller & Nicolas Schmitt, 1993. "Switzerland and the European Economic Area: A General Equilibrium Assessment of Some Measures of Integration," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 129(IV), pages 643-672, December.
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    Cited by:

    1. Faehn, Taran & Grunfeld, Leo A., 1999. "Recent Leaps Towards Free Trade: The Impact on Norwegian Industry and Trade Patterns," Journal of Policy Modeling, Elsevier, vol. 21(6), pages 715-745, November.

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