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EU Enlargement and Beyond: A Simulation Study on EU and Russia Integration

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  • Sulamaa, Pekka
  • Widgrén, Mika

Abstract

This Paper examines the economic effects of the opening of the former Soviet Union. The analysis carried out in the Paper is two-fold. First we simulate the impact of the eastern enlargement of the EU and, second, we analyse how deeper integration between the EU and Russia contributes to this. The analysis is carried out with GTAP computable general equilibrium model. We find that there is a trade-off between the two roads of European integration arrangements. Eastern enlargement seems, even in its very deep form, to be beneficial for all EU regions without causing substantial welfare losses outside the Union. EU-Russia integration, on the other hand, has a different impact. To be beneficial for Russia, free trade between the EU and Russia requires improved productivity in the latter, which may be due to better institutions or increased FDI. This might make the negotiations of the agreement cumbersome and, if agreed, its implementation difficult.

Suggested Citation

  • Sulamaa, Pekka & Widgrén, Mika, 2004. "EU Enlargement and Beyond: A Simulation Study on EU and Russia Integration," CEPR Discussion Papers 4720, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:4720
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    References listed on IDEAS

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    1. Ricahrd 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;CES;MSH, vol. 12(24), pages 125-176, April.
    2. André Sapir, 2000. "Trade Regionalism in Europe: Towards an Integrated Approach," Journal of Common Market Studies, Wiley Blackwell, vol. 38(1), pages 151-162, March.
    3. Ianchovichina, Elena & Robert McDougall, 2000. "Theoretical Structure of Dynamic GTAP," GTAP Technical Papers 480, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
    4. SULAMAA Pekka & WIDGRÉN Mika, "undated". "EU Enlargement and Beyond: A Simulation Study on EU and CIS Integration," EcoMod2003 330700143, EcoMod.
    5. Sapir, Andre, 1998. "The political economy of EC regionalism," European Economic Review, Elsevier, vol. 42(3-5), pages 717-732, May.
    6. Thomas W. Hertel & Padma Swaminathan, 1996. "Introducing Monopolistic Competition into the GTAP Model," GTAP Technical Papers 309, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
    7. Vaittinen, Risto, 2000. "Eastern Enlargement of the European Union - Transition in applicant countries and evaluation of the economic prospects with a dynamic CGE-model," Research Reports 64, VATT Institute for Economic Research.
    8. Hanoch, Giora, 1975. "Production and Demand Models with Direct or Indirect Implicit Additivity," Econometrica, Econometric Society, vol. 43(3), pages 395-419, May.
    9. Vaittinen, Risto, 2004. "Trade Policies and Integration - Evaluations with CGE Models," Research Reports 109, VATT Institute for Economic Research.
    10. Paul S. Armington, 1969. "A Theory of Demand for Products Distinguished by Place of Production (Une théorie de la demande de produits différenciés d'après leur origine) (Una teoría de la demanda de productos distinguiénd," IMF Staff Papers, Palgrave Macmillan, vol. 16(1), pages 159-178, March.
    11. Bhagwati, Jagdish & Greenaway, David & Panagariya, Arvind, 1998. "Trading Preferentially: Theory and Policy," Economic Journal, Royal Economic Society, vol. 108(449), pages 1128-1148, July.
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    Citations

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    Cited by:

    1. Alho, Kari E.O. & Kaitila, Ville & Widgrén, Mika, 2005. "Speed of Convergence and Relocation: New EU Member Countries Catching up with the Old," Discussion Papers 963, The Research Institute of the Finnish Economy.
    2. Sulamaa, Pekka & Widgrén, Mika, 2005. "Asian Regionalism versus Global Free Trade: A Simulation Study on Economic Effects," Discussion Papers 985, The Research Institute of the Finnish Economy.
    3. Andreas Benedictow & Daniel Fjærtoft & Ole Løfsnæs, 2010. "Oil dependency of the Russian economy: an econometric analysis," Discussion Papers 617, Statistics Norway, Research Department.
    4. Sulamaa, Pekka & Widgrén, Mika, 2005. "Economic Effects of Free Trade between the EU and Russia," Discussion Papers 969, The Research Institute of the Finnish Economy.
    5. Susanna Kinnman & Magnus Lodefalk, 2009. "A Global Baltic:Potential Gains from Trade Liberalisation in the Baltic Sea States," Baltic Journal of Economics, Baltic International Centre for Economic Policy Studies, vol. 9(1), pages 55-79, July.
    6. Alho, Kari E.O. & Kaitila, Ville & Widgrén, Mika, 2008. "Offshoring, Relocation and the Speed of Convergence in the Enlarged European Union," Discussion Papers 1156, The Research Institute of the Finnish Economy.
    7. Kaitila, Ville, 2007. "Free Trade between the EU and Russia - Sectoral Effects and Impacts on Northwest Russia," Discussion Papers 1087, The Research Institute of the Finnish Economy.
    8. Benedictow, Andreas & Fjærtoft, Daniel & Løfsnæs, Ole, 2013. "Oil dependency of the Russian economy: An econometric analysis," Economic Modelling, Elsevier, vol. 32(C), pages 400-428.

    More about this item

    Keywords

    european integration; GTAP model; trade;

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration
    • F17 - International Economics - - Trade - - - Trade Forecasting and Simulation

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