Eastern Enlargement and Eu-Labour Markets: Perceptions, Challenges and Opportunities

30 Pages Posted: 8 Apr 2001

See all articles by Tito Boeri

Tito Boeri

Bocconi University - Department of Economics; Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics

Herbert Brücker

German Institute for Economic Research (DIW Berlin); IZA Institute of Labor Economics

Date Written: February 2001

Abstract

This paper summarizes the key findings of a recent study on the impact of Eastern Enlargement of the European Union (EU) on labor markets in the current Member States. The study focuses on three main channels, along which enlargement may affect labor markets in the EU, namely i) trade, ii) foreign direct investment, and iii) migration.

A main conclusion of the study is that trade and capital movements are very unlikely to lead to an equalization of factor prices. Thus, strong economic incentives to migration are bound to be present well beyond the date of accession. We estimate the migration potential associated with Eastern enlargement drawing on a time series model of immigration to Germany, which allows to estimate the long-term equilibrium migration potential, as well as the speed of adjustment at which the potential takes place. Our findings suggest that the long-run stock of immigrants from the CEECs-10 in the EU will increase from 0.85 in 1998 to a peak of 3.9 million persons which is expected to be reached around 30 years after the liberalization of labor movements. Net immigration inflows in the EU are bound to increase immediately reaching a maximum of about 335,000 individuals per year, and subsequently decline to a modest 100,000 to 150,000 people per annum. Around 35% of the migrants are expected to be workers. Microeconometric exercises carried out in the context of the study indicate that such an influx of migrants will have only a moderate impact on wages and employment even in the two most affected countries, Austria and Germany. Although we are dealing with relatively small numbers, they may have an impact on wages and employment in some neighboring regions of Austria and Germany, where immigration from the CEECs-10 is concentrated. In the final section of the paper, we argue for keeping actual migration flows from CEECs-10 under control for a transitional period. Although the chapter in the accession negotiations on the free movement of labor has been already opened, a joint position of the present EU members regarding this fundamental issue is still missing. European leaders will soon have to come to terms with this issue.

Keywords: Immigration, Trade, Transition, EU Enlargement

JEL Classification: F1, F2, J0

Suggested Citation

Boeri, Tito and Brücker, Herbert, Eastern Enlargement and Eu-Labour Markets: Perceptions, Challenges and Opportunities (February 2001). IZA Discussion Paper No. 256. Available at SSRN: https://ssrn.com/abstract=265635

Tito Boeri (Contact Author)

Bocconi University - Department of Economics ( email )

Via Gobbi 5
Milan, 20136
Italy

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Herbert Brücker

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstraße 58
Berlin, 10117
Germany

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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