Economic Benefits from Deep Integration

Abstract

EU enlargement has stalled since the last member joined over ten years ago, marking the longest period without expansion since 1973. This elapsed time contrasts with the potential income gains membership promises. Drawing on the biggest EU enlargement in 2004 and employing a synthetic difference-in-difference estimator on regional data, we estimate that EU membership has increased per capita incomes by more than 30 percent. Capital accumulation and higher productivity contributed broadly equally, while employment effects were small. Gains were initially driven by the industrial sector and later by services. Despite substantial regional heterogeneity in gains—larger for those with better financial access and stronger integration in value chains prior to accession—all regions that joined the EU benefited. Moreover, existing members benefited too, with average income per capita around 10 percent higher. The estimated gains suggest that deep integration carries significant additional economic benefits beyond simple trade unions, providing valuable lessons for future EU enlargement and regional integration efforts elsewhere.

Keywords: European Union, Deep Integration, 2004 EU Enlargement, GDP Growth, NUTS2 Regions

JEL Classification: E65, F15, O11, R11