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The Eastern Enlargement of the Eurozone and Labour Market Adjustment

  • Jaakko Kiander

    ()

    (Government Institute for Economic Research (VATT) Helsinki)

  • Risto Vaittinen

    ()

    (Government Institute for Economic Research (VATT) Helsinki)

  • Tiiu Paas

    ()

    (Institute of Economics, University of Tartu)

This paper analyses the economic effects of the eastern enlargement of the EU both on the existing Member States and the candidate countries using simulation results of a dynamic computable general equilibrium model. In addition to conventional trade policy impacts such as custom union formation and common agricultural policy the effects of factor mobility, induced by institutional changes, are analyzed. The analysis is based on six different scenarios. According to the results EU membership will accelerate growth in output, investment and consumption in the candidate countries in all scenarios. However, it turns out that factor mobility effects dominate those of conventional trade policy. Growth in national income will lag behind GDP growth because profits will be paid out to foreign investors. Migration will slow output growth in the candidate countries and accelerate growth in the existing Member States, while the trends in per capita consumption will be reversed; migration increases per capita consumption in the new Member States and reduces it slightly in the existing ones.

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Paper provided by Free University Berlin, Jean Monnet Centre of Excellence in its series Eastward Enlargement of the Euro-zone Working Papers with number wp06.

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Length: 59 pages
Date of creation: 01 Aug 2002
Date of revision: 01 Aug 2002
Handle: RePEc:ezo:ezppap:wp06
Contact details of provider: Postal: Jean Monnet Centre of Excellence, Freie Universit├Ąt Berlin, Ihnestrasse 22, D-14195 Berlin
Web page: http://www.jmc-berlin.org

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  1. Bernard, A.B. & Jones, C.I., 1993. "Productivity Across Industries and Countries: Time Series Theory and Evidence," Working papers 93-17, Massachusetts Institute of Technology (MIT), Department of Economics.
  2. Thomas W. Hertel & Zhi Wang & Wusheng Yu, 1998. "Understanding the Determinants of Structural Change in World Food Markets," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 80(5), pages 1051-1061.
  3. 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;CES;MSH, vol. 12(24), pages 125-176, 04.
  4. Bauer, Thomas K. & Zimmermann, Klaus F., 1999. "Report No. 3: Assessment of Possible Migration Pressure and its Labour Market Impact Following EU Enlargement to Central and Eastern Europe," IZA Research Reports 3, Institute for the Study of Labor (IZA).
  5. Risto Vaittinen, 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, Government Institute for Economic Research Finland (VATT).
  6. Borjas, George J., 1999. "The economic analysis of immigration," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 28, pages 1697-1760 Elsevier.
  7. 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.
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