Trade and Migration in an Enlarged European Union: A Spatial Analysis

Justin May

No 64, Working Papers from Department of Economics, College of William and Mary

Abstract: One of the most prominent features in the evolution of the European Union (EU) has been its geographical expansion. Using a dynamic general equilibrium approach, this paper predicts the effects of future eastward expansions of the EU on both inter- and intra-national flows of trade and labor. Underlying the simulations is a spatial model of the EU incorporating heterogeneous firms, intra-industry trade, iceberg trade costs, and many possible locations. Locations are populated by a large number of potential firms, and these firms employ labor that varies across countries in its relative skill. The dynamics of the model are such that unprofitable firms are forced to exit in the long run, and workers have the opportunity to migrate in response to steep gradients in real compensation. Novel features of the data used here are that locations are defined in a very precise way and that the simulations take as their starting point a proxy for the actual distribution of economic activity across the European landmass. The model is calibrated to match aggregate trade and migration data from the 2004 enlargement as well as data on exporter characteristics. Simulations of enlargement predict an increase in aggregate exports of potential new members to the previous EU-15 of 4.8 percent of GDP in the five-year period following adoption of the acquis communautaire and net migration flows from potential new members to the previous EU-15 of 1.1 percent of aggregate acceding country population over the same period. Moreover, the simulations deliver many of the stylized facts of economic geography.

Keywords: Dynamic General Equilibrium; Enlargement; European Union; Migration; Spatial; Trade (search for similar items in EconPapers)
JEL-codes: F12 F15 F16 F22 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2007-10-31
New Economics Papers: this item is included in nep-eec, nep-int, nep-mig and nep-tra
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://economics.wm.edu/wp/cwm_wp64.pdf (application/pdf)

Related works:
Journal Article: Trade and Migration in an Enlarged European Union: A Spatial Analysis (2010)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cwm:wpaper:64

Access Statistics for this paper

More papers in Working Papers from Department of Economics, College of William and Mary Contact information at EDIRC.
Bibliographic data for series maintained by Daifeng He ( this e-mail address is bad, please contact ) and Alfredo Pereira ().