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Speed of Convergence and Relocation – New EU Member Countries Catching up with the Old. CEPS ENEPRI Working Papers No. 34, 1 April 2005

Alho, Kari E.O. and Kaitila, Ville and Widgrén, Mika. (2005) Speed of Convergence and Relocation – New EU Member Countries Catching up with the Old. CEPS ENEPRI Working Papers No. 34, 1 April 2005. [Working Paper]

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    Abstract

    Economic convergence of the EU’s new member countries (NMCs) towards the incumbent EU countries (EU-15) is of paramount importance for both partners, not only in terms of real income but also in nominal terms. This study creates a dynamic, computable general equilibrium model, starting from the Balassa-Samuelson two-sector framework, which is then modified and enlarged (with, among other things, endogenous capital formation, consumption behaviour and labour mobility) to address several other issues such as uncertainty, welfare and sustainability in terms of foreign indebtedness. At the same time, the authors make flows of foreign direct investment (FDI) endogenous in order to evaluate the impact convergence has on the EU-15 and the interaction between the two regions through FDI. The study finds that in a general equilibrium setting, fears of adverse effects resulting from a relocation of EU-15 manufacturing to the NMCs are not well founded.

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    Item Type: Working Paper
    Subjects for non-EU documents: Countries > Latvia
    Countries > Estonia
    Countries > Slovakia
    Countries > Lithuania
    Countries > Slovenia
    Countries > Cyprus
    Countries > Malta
    Countries > Poland
    Countries > Hungary
    Countries > Czech Republic
    EU policies and themes > Policies & related activities > economic and financial affairs > EMU/EMS/euro
    Subjects for EU documents: UNSPECIFIED
    EU Series and Periodicals: UNSPECIFIED
    EU Annual Reports: UNSPECIFIED
    Series: Series > Centre for European Policy Studies (Brussels) > ENEPRI Working Papers
    Depositing User: Phil Wilkin
    Official EU Document: No
    Language: English
    Date Deposited: 31 Mar 2007
    Page Range: p. 23
    Last Modified: 15 Feb 2011 17:44
    URI: http://aei.pitt.edu/id/eprint/6740

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