The effects of enlargement in imperfect labour markets

Etienne Wasmer A panel discussion shares some of the features of a Nash equilibrium, in the sense that panellists need to prepare their speeches taking into account what others will do. To avoid repetition and to deal in advance with some of the emphasis put on the gains provided by enlargement, and on the minimization of its costs, it is tempting to take a view slightly different from the consensus (a very clear exposition can be found in Boeri and Brücker, 2001). Let us first notice that enlargement was primarily and almost exclusively a political decision. This decision was reached in the years following the fall of the Berlin Wall for geo-strategic reasons: (a) to bring political stability to the eastern part of the continent and (b) as a symbol of the political and economic victory of democracies and market economies over the former Eastern bloc. Twelve applications (ten from former Communist countries, plus those of Malta and Cyprus) led to negotiations. Very rapidly, negotiations became de facto understood as leading to entry into the Union in a more or less near future. The criteria for entry were adopted in 1993 in Copenhagen. The decisions to present an application, to open negotiations, to set criteria and to approve formally, being mostly political, may also be associated with positive economic consequences for both the 15 European Union Member States (prior to the 2004 enlargement; we shall call them ‘incumbents’ hereafter) and for the newcomers (we shall call them ‘accession….