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?

19 Pages Posted: 18 Mar 2003

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 a priori, 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?. Available at SSRN: https://ssrn.com/abstract=320719