Working Paper: CEPR ID: DP2174
Authors: Hanswerner Sinn
Abstract: The Paper studies the role of international implications after EU enlargement. Based on a formal model, with migration costs for both capital and labour, it predicts a two-sided migration from the new to the old EU countries, which is later reversed. As the migration pattern chosen by market forces turns out to be efficient, migration should not be artificially reduced by means of legal constraints or subsidies to the new member countries. The Paper draws the parallel with German unification and points out the lessons to be learned by Europe. The analysis concludes with a brief discussion of the ‘second best’ problem posed by the existence of welfare states in the old member countries.
Keywords: EU enlargement; migration; welfare state
JEL Codes: F15; F22; H50
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Migration costs associated with capital and labour (F20) | Migration patterns from new EU countries to old ones (F22) |
| Market forces (P42) | Efficient allocation of resources (D61) |
| Governmental intervention (H10) | Market efficiency (G14) |
| Migration decisions based on individual preferences and economic conditions (J61) | First-best allocation of resources (D61) |
| Temporary wave of migration (F22) | Return migration as conditions stabilize (F22) |