Working Paper: CEPR ID: DP4720
Authors: Pekka Sulamaa; Mika Widgrn
Abstract: This Paper examines the economic effects of the opening of the former Soviet Union. The analysis carried out in the Paper is two-fold. First we simulate the impact of the eastern enlargement of the EU and, second, we analyse how deeper integration between the EU and Russia contributes to this. The analysis is carried out with GTAP computable general equilibrium model. We find that there is a trade-off between the two roads of European integration arrangements. Eastern enlargement seems, even in its very deep form, to be beneficial for all EU regions without causing substantial welfare losses outside the Union. EU-Russia integration, on the other hand, has a different impact. To be beneficial for Russia, free trade between the EU and Russia requires improved productivity in the latter, which may be due to better institutions or increased FDI. This might make the negotiations of the agreement cumbersome and, if agreed, its implementation difficult.
Keywords: European integration; GTAP model; trade
JEL Codes: F14; F15; F17
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| EU enlargement (F36) | EU welfare (I38) |
| EU-Russia integration (F15) | Russian welfare (P25) |
| EU-Russia integration (F15) | productivity (O49) |
| productivity (O49) | Russian welfare (P25) |