Eastern Enlargement of the EU: How Much is it Worth for Austria?

Abstract

We evaluate potential costs and benefits of Eastern enlargement of the EU. In addressing fiscal costs of enlargement in addition to tariff and nontariff barriers, we arrive at important conclusions: 1) Overall, extending EU membership to Eastern applicants is more than worth its price for Austria. The (dynamic) gains from integration clearly outweigh the budgetary costs. 2) Somewhat surprisingly, the wage spread between skilled and unskilled labor is narrowed rather than widened. 3) significant sectoral and intergenerational redistribution, however, may render EU enlargement difficult on political grounds whereby the agricultural sector and young generations are at the losing end.

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JEL Classification: C68, F13, F15