Macroeconomic impact of Eastern enlargement on Germany and UK: evidence from a CGE model

Abstract

The Eastern enlargement of the EU is accompanied by a substantial increase in trade, capital movements and migration between the incumbent and the new member states. This article examines the effects of these trade and factor flows on Germany and United Kingdom using a CGE model which considers wage rigidities. We find that Eastern enlargement positively impact real GDP, wages and employment in both economies. The effects are substantially larger than those found in previous studies.