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The Impact of EU Enlargement in 2004 and 2007 on FDI and Migration Flows Gravity Analysis of Factor Mobility

Author

Listed:
  • Andreas Breitenfellner

    () (Oesterreichische Nationalbank)

  • Jesus Crespo Cuaresma

    () (Oesterreichische Nationalbank)

  • Peter Mooslechner

    () (Oesterreichische Nationalbank)

  • Doris Ritzberger-Grünwald

    () (Oesterreichische Nationalbank)

Abstract

This paper contributes to the ex post assessment of macroeconomic effects triggered by the 2004 and 2007 wave of EU enlargement, with a specific focus on factor trade, i.e. the crossborder mobility of labor and capital. While most of the potential for trade in goods and for foreign direct investment (FDI) was tapped ahead of actual enlargement, above all migration effects are spread out over a longer period, given transition arrangements for labor market integration. We use (innovative) gravity models to establish the potential for factor trade and crosscheck the results against recent developments. Our key finding is the uneven development of capital and labor mobility since EU enlargement. While migration potentials are materializing as expected, FDI stocks have remained relatively stable at already high levels. Furthermore, we observe a nonlinear relationship between migration and per capita income that may be explained on theoretical grounds and attributed to institutional factors. While the highest-income countries (above all Slovenia and the Czech Republic) are already turning into immigration countries, the low-income countries and those last to join the EU (Bulgaria and Romania) are likely to see further emigration and more FDI inflows.

Suggested Citation

  • Andreas Breitenfellner & Jesus Crespo Cuaresma & Peter Mooslechner & Doris Ritzberger-Grünwald, 2008. "The Impact of EU Enlargement in 2004 and 2007 on FDI and Migration Flows Gravity Analysis of Factor Mobility," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue 2, pages 101-120.
  • Handle: RePEc:onb:oenbmp:y:2008:i:2:b:5
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    References listed on IDEAS

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    Cited by:

    1. Bosco Maria Giovanna, 2012. "FDI in Turkey: An Out-Of-Sample Analysis Of Unexploited Potential," Review of Middle East Economics and Finance, De Gruyter, vol. 7(3), pages 1-21, May.
    2. Slavica Penev & Matija Rojec, 2014. "The Future Of Fdi In South Eastern European Countries: Messages From New Eu Member States," Economic Annals, Faculty of Economics, University of Belgrade, vol. 59(202), pages 43-68, July – Se.

    More about this item

    Keywords

    EU enlargement; factor trade; labor mobility; capital mobility; migration; foreign direct investment; gravity model;

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • F15 - International Economics - - Trade - - - Economic Integration
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

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