Eastern Enlargement of the EU: Jobs, Investment and Welfare in Present Member Countries

Heijdra, Ben J.; Keuschnigg, Christian; Kohler, Wilhelm

Eastern Enlargement of the EU: Jobs, Investment and Welfare in Present Member Countries

CESifo Working Paper Series No. 718

52 Pages Posted: 30 Jun 2002

See all articles by Ben J. Heijdra

Ben J. Heijdra

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

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)

Date Written: May 2002

Abstract

Eastern enlargement of the EU promises gains, but also imposes fiscal costs on incumbent countries. A sensitive issue concerns immigration, jobs and wages. We address these issues in a general equilibrium framework, both analytically and through numerical simulations. Analytical results identify capital accumulation as a prime transmission channel. Using a dynamic CGE model with search unemployment of high- and low-skilled labor, we simulate the effects of enlargement on Germany finding small effects from trade, but more pronounced labor market effects from migration. Based on German model elasticities, we approximate expected benefits and costs for other member countries as well.

Keywords: EU Enlargement, Economic Integration, Economic Growth, Capital Accumulation, Search Unemployment, Computable General Equilibrium Analysis

JEL Classification: C68, F13, F15

Suggested Citation: Suggested Citation

Heijdra, Ben J. and Keuschnigg, Christian and Kohler, Wilhelm K., Eastern Enlargement of the EU: Jobs, Investment and Welfare in Present Member Countries (May 2002). CESifo Working Paper Series No. 718. Available at SSRN: https://ssrn.com/abstract=316759