An Incumbent Country View on Eastern Enlargement of the EU. Part I: A General Treatment

Item Type Journal paper

An eastern enlargement of the EU, from an incumbent country point of view, involves a fiscal burden from extending Union agricultural and cohesion policies to new members, coupled with potential gains as well as adjustment problems deriving from an extended customs union and a larger single market. Enlargement is controversial, because the net effect is unclear, a priori, and will certainly vary across individual countries. Our two-part contribution tries to do shed light on this controversy. In this first part, we present a general treatment of the likely effects on different incumbent countries, while a subsequent companion paper will take a closer look at the specific
case of Austria. The general view of part I, in turn, first focuses on various empirical measures highlighting crucial differences between incumbents, pertaining to the fiscal burden on the one hand, and integration gains on the other. We then argue that a proper evaluation must rely on an explicit welfare criterion, and we use a general model of economic integration in order to identify the principal channels through which aggregate welfare of an incumbent country is affected by an enlargement of the EU. We address traditional effects of trade creation and trade diversion, as well
as growth effects arising from an abolition of trade barriers. In addition, we ask how enlargement affects foreign direct investment and labor migration, and what this implies in welfare terms for an
incumbent western European country. Taken together, these effects generate a certain presumption of integration gains, which need to be set against the fiscal burden. However, a final judgement requires
a case-by-case approach, based on empirical implementations of enriched and parameterized models for specific countries. The companion paper, therefore, uses a suitably specified, calibrated dynamic equilibrium model, in order to take a closer look at the Austrian case.

Authors Kohler, Wilhelm & Keuschnigg, Christian
Journal or Publication Title Empirica
Language English
Subjects other research area
HSG Classification not classified
Refereed No
Date 25 December 2000
Publisher Springer
Place of Publication Dordrecht
Volume 27
Number 4
Page Range 325-351
Number of Pages 27
ISSN 0340-8744
Depositing User Prof. Dr. Christian Keuschnigg
Date Deposited 25 Sep 2008 08:19
Last Modified 05 Jun 2020 00:21



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Kohler, Wilhelm & Keuschnigg, Christian (2000) An Incumbent Country View on Eastern Enlargement of the EU. Part I: A General Treatment. Empirica, 27 (4). 325-351. ISSN 0340-8744

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