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EU enlargement and the future of the welfare state

  • Sinn, Hans-Werner

The eastern enlargement of the EU resembles German unification in its momentousness. Whereas the latter led to a 26\% increase in the population of the Federal Republic, the former will increase the population of the EU by 28\% if all ten entry aspirants are accepted. A special problem will be posed by migration. Given the existing wage differences between eastern and western European countries, a massive westward migration can be expected after enlargement. A temporary east-to-west migration until the eastern countries create an efficient capital stock makes economic sense if this is driven by wage differences and meets with a flexible labour market. Migration does not make economic sense, however, if, and to the extent that, it is induced by the current social assistance systems. Moreover, welfare-motivated migration would create competition among western European states to frighten off potential migrants, and this would lead to an erosion of the traditional social welfare state. If the EU plan incorporated limitation on the free movement of labour, beneficial migration would also cease. A better solution would be to limit access to the western social system, at least for a transitional period, in order to filter out migration induced by differing social standards. An EU-wide application of the home-country principle in the granting of social benefits would achieve this goal.

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Paper provided by University of Munich, Department of Economics in its series Munich Reprints in Economics with number 19736.

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Date of creation: 2002
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Publication status: Published in Scottish Journal of Political Economy 1 49(2002): pp. 104-115
Handle: RePEc:lmu:muenar:19736
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