An Incumbent Country View on Eastern Enlargement of the EU. Part II: The Austrian Case
Journal
Empirica
ISSN
0340-8744
ISSN-Digital
1573-6911
Type
journal article
Date Issued
2001-06-01
Author(s)
Abstract
In Part I of this paper, we have presented a general treatment of the welfare effect of an eastern EU enlargement on incumbent countries. Part II now takes a closer look at the Austrian case. We first present a few descriptive statistics on the role that east-west trade, as well as the pertinent trade barriers, play for the Austrian economy. We then argue that a numerical simulation, based on a suitably specified general equilibrium model, is an appropriate way towards a full evaluation of the welfare and distributional consequences of enlargement. Focussing on the Austrian case, we therefore implement an enriched and parameterized version of the general model used in Part I of the paper. The model features savings and investment, based on intertemporal optimization, as well as sectoral allocation of capital and labor (skilled/unskilled), based on product differentiation and imperfect competition. In addition, the model incorporates a detailed representation of the government budget, featuring distortive taxes and subsidies, as well as transfers to domestic households, and financial transactions with the EU. The model allows us to take a quantitative view on both the costs and integration gains of an eastern enlargement. Relying on a Hicksian welfare measure which incorporates both long-run effects and short-run adjustment, our numerical simulations indicate that, in the Austrian case, the integration gains outweigh the fiscal burden.
Language
English
Keywords
Monetary unions
economic theory
welfare
equilibrium
studies
simulation.
HSG Classification
not classified
Refereed
No
Publisher
Springer
Publisher place
Dordrecht
Volume
28
Number
2
Start page
159
End page
185
Pages
27
Subject(s)
Eprints ID
21968