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May Free Capital mobility before accession be unfavorable for admission to the EU ?

  • Gül, ERTAN ÖZGÜZER

We examine the dynamics that may compensate the cost of redistribution policy in the European Union (EU), which is one of the obstacles for a candidate member country, namely Turkey to be admitted. We adress two main issues : i) may a total factor productivity (TFP) increases in the candidate country due to the positive effect of accession on institutional development compensate the cost of redistribution policy and ii) may free capital mobility before accession decrease EU’s incentive for admitting the candidate country. In a two-country model we assume that after Turkish accession, the European household gives a transfer to the Turkish household whereas an upwart TFP shift arises in Turkey due to the positive effect of accession on institutional development. We first find that a TFP increase in Turkey compensates the cost of transfer. Second, allowing for free capital mobility before accession turns out to be unfavorable for admission to the EU.

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Paper provided by Université catholique de Louvain, Département des Sciences Economiques in its series Discussion Papers (ECON - Département des Sciences Economiques) with number 2007035.

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Length: 18
Date of creation: 01 Dec 2007
Date of revision:
Handle: RePEc:ctl:louvec:2007035
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  1. Caselli, Francesco & Tenreyro, Silvana, 2005. "Is Poland the Next Spain?," CEPR Discussion Papers 4877, C.E.P.R. Discussion Papers.
  2. Buch, Claudia M. & Piazolo, Daniel, 2001. "Capital and trade flows in Europe and the impact of enlargement," Economic Systems, Elsevier, vol. 25(3), pages 183-214, September.
  3. Dawson, John W, 1998. "Institutions, Investment, and Growth: New Cross-Country and Panel Data Evidence," Economic Inquiry, Western Economic Association International, vol. 36(4), pages 603-19, October.
  4. Bernard M. Hoekman & Togan Sübidey, 2005. "Turkey : Economic Reform and Accession to the European Union," World Bank Publications, The World Bank, number 7494.
  5. Harry Flam, 2003. "Turkey and the EU: Politics and Economics of Accession," CESifo Working Paper Series 893, CESifo Group Munich.
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