EU Accession and Income Growth: An Empirical Approach

(Arjan Marcel) Lejour, Vladimir Solanic, (Paul Johannes George) Tang

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Abstract

To gauge the dynamic effects, we follow a two-step procedure in which a gravity equation for bilateral trade shows the trade effect of EU membership and a growth regression yields the income effect of trade. Shared EU membership is found to increase trade between two of its member states with about 34%. EU membership may contribute to trade by inducing countries to improve the quality of their institutions.

Trade increases by another 22% if institutions improve, yielding a total trade increase of 56%. Improved openness increases income by 37.5% according to our estimates. Adding a small direct effect of improved institutions on income, the total income effect of EU membership is 39% for the ten new members. This implies that EU membership, or its effect on trade and institutions, could lead to large economic gains for the new member states, but does not bring them economically on par with the old member states.
Original languageEnglish
Place of PublicationThe Hague
PublisherCPB
Number of pages41
ISBN (Print)9058332969, 9789058332967
Publication statusPublished - Oct 2006

Publication series

NameCPB discussion paper
Volumeno. 72

Keywords

  • National income
  • EU-landen
  • Europe
  • Income
  • European Union countries
  • Commerce
  • Inkomensverdeling
  • Convergentie (economie)
  • Toetredingen

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