Regional Policies and EU Enlargement

64 Pages Posted: 5 Mar 2003

See all articles by Michele Boldrin

Michele Boldrin

University of Minnesota - Twin Cities - Department of Economics; Universidad Carlos III de Madrid - Department of Economics; Centre for Economic Policy Research (CEPR)

Fabio Canova

Bi norwegian business school

Date Written: February 2003

Abstract

Taking both the enlargement process, as currently defined by the EU, and the structural funds as a given, this Paper examines what is the best way for candidate countries to fuel real convergence. The experience from earlier EU enlargements and current economic conditions within the CEEC10 suggest that placing too high expectations on enlargement per se would be misplaced. Further, regional transfers taking place under the structural and cohesion policies are unlikely to become the growth engines of the CEEC10. They may increase income in the receiving countries by an amount equal to the one transferred, but there is no evidence they will have an impact on long-run growth rates. To achieve long-run growth at rates higher than average an appropriate mix of European and national policies is needed. This includes further fostering of trade integration within the EU, restructuring public spending, creation of supply side incentives by proper reforms of fiscal and social insurance policies, free movement of capital and labour, together with a competitive level of labour income taxation. Based on historical experience two types of policies appear to be particularly relevant. First, public programs for long-term income support, corporate subsidies and other forms of income transfer have negative effect on economic growth. We believe they should be terminated as soon as possible. Second, labour and capital mobility are good for growth and economic convergence. In particular, the adoption or continuation of various transfer and/or regulation policies aimed at eliminating labour migration from the CEEC is wrong and damaging. The fear of migration has been magnified by skillful politicians: Migrations in past enlargements have been small. There is no reason to expect it to be large in this case.

Keywords: Convergence, regional policies, structural funds, labour and capital mobility

JEL Classification: H50, O10, R10

Suggested Citation

Boldrin, Michele and Canova, Fabio, Regional Policies and EU Enlargement (February 2003). Available at SSRN: https://ssrn.com/abstract=385200

Michele Boldrin (Contact Author)

University of Minnesota - Twin Cities - Department of Economics ( email )

271 19th Avenue South
Minneapolis, MN 55455
United States
612-624-4551 (Phone)
612-624-0209 (Fax)

Universidad Carlos III de Madrid - Department of Economics

Calle Madrid 126
Getafe, 28903
Spain

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Fabio Canova

Bi norwegian business school ( email )

Nydalsveien 37
Oslo, 0484
Norway

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