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

Keuschnigg, Christian; Kohler, Wilhelm

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

Review of International Economics, Vol. 10, pp. 324-342, 2002

19 Pages Posted: 15 Dec 2002

See all articles by Christian Keuschnigg

Christian Keuschnigg

University of St. Gallen – Department of Economics (FGN-HSG); CESifo (Center for Economic Studies and Ifo Institute); Centre for Economic Policy Research (CEPR)

Wilhelm Kohler

University of Tuebingen - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

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Abstract

For present member countries, eastern EU enlargement entails gains from integration as well as fiscal costs. The authors use a calibrated model to quantify the dynamic effects of discriminatory trade liberalization and immigration from eastern applicants. It is found that enlargement is expansionary and yields a remarkable fiscal dividend. Surprisingly, integration compresses the wage spread between skilled and unskilled labor. Overall, the (dynamic) gains from integration clearly outweigh the fiscal cost, while ambiguous enlargement is found to hold a remarkable net welfare gain for Austria.

Suggested Citation: Suggested Citation

Keuschnigg, Christian and Kohler, Wilhelm K., Eastern Enlargement of the EU: How Much is it Worth for Austria?. Review of International Economics, Vol. 10, pp. 324-342, 2002. Available at SSRN: https://ssrn.com/abstract=312862