A Tide that Lifts Some Boats: Assessing the Macroeconomic Effects of EU Enlargement

Zonda Joe Maganga, Lin Chang-Ching and Chang Ming-Jen ()
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Zonda Joe Maganga: Health Economics and Policy Unit, Kamuzu University of Health Sciences, Lilongwe, Malawi
Lin Chang-Ching: Department of Economics, National Cheng Kung University, Tainan, Taiwan
Chang Ming-Jen: Department of Economics, National Dong Hwa University, Hualien, Taiwan

The B.E. Journal of Macroeconomics, 2024, vol. 24, issue 1, 305-352

Abstract: Based on two-country scenarios (entrants vs. incumbents), this paper employs the synthetic control method to quantify the macroeconomic effects of the European Union (EU) enlargement, and examines whether these effects varied before, during, and after economic crises. We find that enlargement effects are very complex, and significantly varied across economic cycles and the country groups. In particular, EU enlargement induced large and positive effects on the entrants which were merely stifled in the wake of the financial crisis and the subsequent euro crisis. In the interim, the 2004 enlargement triggered an instantaneous negative shock on the incumbents which was further exacerbated by the crises. Subsequently, the entrants recovered beyond their pre-crises gains, registering approximately 14 % higher per capita incomes by 2019, with Poland emerging as a clear winner. Meanwhile, incumbents’ per capita incomes have, on average, declined by approximately 9 %. While our findings largely support the notion that the entrants are en route to catching up with their incumbent counterparts, a formal β-convergence analysis exploiting the observed and synthetic data intuitively confirms that EU integration reduces the half-life by 50 %.

Keywords: European Union; economic growth; economic convergence; economic integration (search for similar items in EconPapers)
JEL-codes: C21 E30 E60 F15 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1515/bejm-2023-0053

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