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An incumbent country view on eastern enlargement of the EU Part II: The Austrian case

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Abstract

In part I of this paper, we have presented a general treatment of the welfare effect of an eastern EU enlargement on incumbent countries. Part II now takes a closer look at the Austrian case. We first present a few descriptive statistics on the role that east-west trade, as well as the pertinent trade barriers, play for the Austrian economy. We then argue that a numerical simulation, based on a suitably specified general equilibrium model, is an appropriate way towards a full evaluation of the welfare and distributional consequences of enlargement. Focusing on the Austrian case, we therefore implement an enriched and parameterized version of the general model used in part I of the paper. The model features savings and investment, based on intertemporal optimization, as well as sectoral allocation of capital and labor (skilled/unskilled), based on product differentiation and imperfect competition. In addition, the model incorporates a detailed representation of the government budget, featuring distortive taces and subsidies, as well as transfers to domestic households, and financial transactions with the EU. The model allows us to take a quantitative view on both the costs and integrations gains of en eastern enlargement. Relying on a Hicksian welfare measure which incorporates both long-run effects and short-run adjustment, our numerical simulations indicate that, in the Austrian case, the integration gains outweigh the fiscal burden.

Suggested Citation

  • Wilhelm Kohler & Christian Keuschnigg, 2000. "An incumbent country view on eastern enlargement of the EU Part II: The Austrian case," Economics working papers 2000-26, Department of Economics, Johannes Kepler University Linz, Austria.
  • Handle: RePEc:jku:econwp:2000_26
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    1. André Sapir & Richard Baldwin & Daniel Cohen & Anthony Venables, 1999. "Market integration, regionalism and the global economy," ULB Institutional Repository 2013/8074, ULB -- Universite Libre de Bruxelles.
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    5. Wilhelm Kohler, 2000. "Internationale Migration: Anmerkungen aus der Sicht der Aussenwirtschaftstheorie," Economics working papers 2000-22, Department of Economics, Johannes Kepler University Linz, Austria.
    6. Keuschnigg, Christian & Kohler, Wilhelm, 2002. "Eastern Enlargement of the EU: How Much Is It Worth for Austria?," Review of International Economics, Wiley Blackwell, vol. 10(2), pages 324-342, May.
    7. 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.
    8. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
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    Cited by:

    1. Ben J Heijdra & Christian Keuschnigg & Wilhelm Kohler, 2014. "Eastern Enlargement of the EU: Jobs, Investment and Welfare in Present Member Countries," World Scientific Book Chapters,in: European Economic Integration, WTO Membership, Immigration and Offshoring, chapter 2, pages 37-83 World Scientific Publishing Co. Pte. Ltd..
    2. repec:onb:oenbwp:y::i:61:b:1 is not listed on IDEAS
    3. Anders Due Madsen & Morten Lobedanz Sørensen, 2002. "Economic Consequences for Denmark of EU Enlargement," DREAM Working Paper Series 200202, Danish Rational Economic Agents Model, DREAM.
    4. Torstein Bye & Erling Erling Holmoy, 2010. "Removing Policy-based Comparative Advantage for Energy Intensive Production: Necessary Adjustments of the Real Exchange Rate and Industry Structure," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 177-198.
    5. Anders Due Madsen & Morten Lobedanz Sørensen, 2002. "Effects of Trade and Market Integration in a Small Open Economy - A Dynamic CGE Approach," DREAM Working Paper Series 200203, Danish Rational Economic Agents Model, DREAM.
    6. repec:dgr:rugccs:200213 is not listed on IDEAS
    7. Wilhelm Kohler, 2003. "Eastern Enlargement of the EU: A Comprehensive Welfare Assessment," Economics working papers 2003-16, Department of Economics, Johannes Kepler University Linz, Austria.
    8. Deltas, George & Van Der Beek, Gregor, 2003. "An empirical model of transfers within a federation, with an application to the European Union," Journal of Urban Economics, Elsevier, vol. 53(3), pages 339-356, May.

    More about this item

    JEL classification:

    • F02 - International Economics - - General - - - International Economic Order and Integration
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F15 - International Economics - - Trade - - - Economic Integration

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