DP1786 Eastern Enlargement of the EU: How much is it Worth for Austria?

Author(s): Christian Keuschnigg , Wilhelm K. Kohler

Publication Date: January 1998

Keyword(s): Computable General Equilibrium Models , dynamic trade modelling , eastern enlargement , European Integration

JEL(s): C68 , F13 , F15

Programme Areas: International Trade and Regional Economics

Link to this Page: www.cepr.org/pubs/dps/DP1786.asp

We evaluate potential costs and benefits of Eastern enlargement of the EU. In addressing fiscal costs of enlargement in addition to tariff and non-tariff barriers, we arrive at important conclusions: 1) Overall, extending EU membership to Eastern applicants is more than worth its price to Austria. The (dynamic) gains from integration clearly outweigh the budgetary costs. 2) Somewhat surprisingly, the wage spread between skilled and unskilled labour is narrowed rather than widened. 3) Significant sectoral and intergenerational redistribution may nevertheless render EU enlargement difficult on political grounds, with the agricultural sector and the young losing out.