An Applied General Equilibrium Analysis of EU Integration for Hungary and Slovakia

Alena Kimakova and Reza Rajabiun
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Alena Kimakova: Brandeis University and Commerzbank Capital Markets Eastern Europe
Reza Rajabiun: ASP-Kiel Institute of World Economics

No 9, Transition Economics Series from Institute for Advanced Studies

Abstract: The implications of integration with the European Union on the labour markets of Central and East European transition economies have been neglected in the literature. We build an Applied General Equilibrium Model for Hungary and the Slovak Republic and simulate the integration process with specific reference to the labour markets in these economies. The results show that the effects of joining the preferential trading arrangement of the EU are context dependent. Labour markets in the Slovak Republic are more sensitive to the trade diverting effects of this form of integration than those of Hungary. This is especially the case for the utilisation of skilled labour and can be justified by the structural differences between the two economies. This would imply that Slovakia has a lower potential for building on the existing human capital capacities. For Hungary, since the EU is the dominant trading partner, the scope for diversion and the resulting structural distortions in the labour market remain limited.

Keywords: Computable general equilibrium; Transition economies; International trade; Labour; Integration (search for similar items in EconPapers)
JEL-codes: D58 F15 J21 P33 (search for similar items in EconPapers)
Pages: 30 pages
Date: 1999-05
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https://irihs.ihs.ac.at/id/eprint/1171 First version, 1999 (application/pdf)

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