Suchergebnisse

We explore the economic implications of the possible accession of Croatia to the European Union. We focus on two main changes associated with the EU-membership: accession to the internal European Market and institutional reforms in Croatia triggered by the EU-membership. consumption per capita in Croatia is estimated to rise by about 2.5% as a result of accession to the internal market. In particular the textile and wearing apparel sectors expand. If Croatia succeeds in reforming its domestic institutions in response to the EU-membership, income levels in Croatia could increase even more. In particular, tentative estimates suggest that GDP per capita in Croatia could even rise by additional 8%. Overall, the macroeconomic implications for the existing EU countries are negligible.

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.