گسترش اتحادیه اروپا شرقی و سرمایه گذاری خارجی : مفاهیم از یک مدل رشد نئوکلاسیک

In this paper, we study how eastward enlargement of the EU may affect the economies of old and new EU members and non-accession countries in the context of a multi-country neoclassical growth model where foreign investment is subject to border costs. We assume that at the moment of the EU enlargement border costs between the old and new EU member states are eliminated but remain unchanged between the old EU member states and the non-accession countries. In a calibrated version of the model, the short-run effects of the EU enlargement proved to be relatively small for all the economies considered. The long-run effects are however significant: in the accession countries, investors from the old EU member states become permanent owners of about 3/4 of capital, while in the non-accession countries, they are forced out of business by local producers. Journal of Comparative Economics36 (2) (2008) 307–325.

On May 1, 2004, eight Central and Eastern European (CEE) transition countries, Cyprus and Malta joined the EU, which had previously been composed of 15 developed countries.1 This EU enlargement was an unprecedented attempt at political and economic integration in terms of its scope, diversity and possible consequences. The channels through which EU enlargement may affect economies in the region are various: monetary union, foreign investment, migration, trade, etc.2 In this paper, we focus on one of these channels, foreign investment.3 We argue that this channel is important because there is a major difference between the capital stocks and hence, between the Marginal Productivities of Capital (MPC) of the EU15 and the non-EU15 transition countries, which is likely to generate large capital flows from the former to the latter countries.4 In the case of previous EU enlargements, the empirical literature shows that poor countries joining the EU experienced a subsequent increase in capital inflows, e.g., Baldwin et al. (1997), Grabbe (2001). Furthermore, in the wake of the 2004 EU enlargement, there were major differences in Foreign Direct Investment (FDI) stocks between accession and the non-accession transition countries, see, e.g., Egger and Pfaffermayr (2002) and Henriot (2003). In the paper, we argue that the these patterns arise because accession of a country to the EU reduces the costs that EU15 agents incur when investing in such a country (we refer to these costs as “border costs”). Border costs can be interpreted as “risk to invest” (in a broad sense) and all kinds of costs associated with managing foreign investment (e.g., cost of acquiring information, cost of monitoring), which is reduced or entirely removed if a country becomes an EU member; the reason is that an accession country takes over the whole legal stock of the EU which includes the four freedoms (free movement of goods, services, labour and capital) and also, a common competition law. We introduce border costs in a multi-country neoclassical growth model. We first consider a two-country variant of the model where one country represents the EU15 and the other represents the new accession countries. We assume that border costs between the EU15 and the accession countries are eliminated after EU accession. Using this model, we ask: How may EU enlargement affect output, consumption, labour and welfare of the EU15 and the accession countries? We then consider a three-country setup, where the three countries belong to the EU15, the accession and the non-accession groups of countries. We assume that at the moment of accession, border costs are entirely eliminated between the EU15 and the accession countries but remain unchanged between the enlarged EU and the non-accession countries. In the context of the three-country model, we address the following two questions. First, how can the introduction of poor non-accession countries affect the model's predictions with regard to the EU15 and the accession countries? Second, how may the EU accession of some transition countries affect the remaining (i.e., non-accession) transition countries? Our analysis is related to recent empirical literature investigating FDI determinants in transition countries.5 Furthermore, our border costs can be viewed as a measure of distance (in a broad sense) between countries, and are similar to the distance measures used in the FDI gravity literature, e.g., trade freight costs and tariffs in Brainard (1997). The presence of border costs complicates the solution procedure considerably: our multi-country model has occasionally binding inequality constraints, so that equilibrium allocation is in general not interior, and policy functions have a kink. A one-country model with occasionally binding inequality constraints is extensively studied in Christiano and Fisher (2000), however, to the best of our knowledge, similar multi-country models have not been studied yet. To simplify the computation of equilibrium, we use two complementary strategies: one is to reduce the number of Kuhn–Tucker conditions by establishing some properties of equilibrium analytically, and the other is to convert a three-country model into a two-country model by using aggregation theory. In addition, we restrict the admissible set of initial conditions to be consistent with the optimal policy functions; this allows us to reduce the number of state variables in the model. We calibrate the model to match the population sizes and the capital stocks of the EU15, the new accession and non-accession groups of countries, and we compute the transitional dynamics. Our main findings are as follows: In the short run, the implications of the model under the non-accession and accession scenarios are similar both qualitatively and quantitatively. To be specific, under both scenarios, a large initial difference in the MPC between the rich EU15 and the poor non-EU15 (accession or non-accession) countries leads to massive capital flows from the former to the latter; this decreases (increases) wages, output and consumption in the EU15 (non-EU15) countries. The long-run consequences of the non-accession and accession scenarios are however very different: under the former scenario, residents of the non-accession countries eventually buy out all domestic capital from EU15 investors, while under the latter scenario, EU15 investors continue to hold a part of the accession country's capital in perpetuity. Quantitatively, the latter effect can be very large: in our benchmark model, EU15 investors end up owning more than 75% of the accession country's capital. As far as welfare is concerned, our model predicts that the capital trade is beneficial for both the rich EU15 and the poor non-EU15 (accession or non-accession) countries independently of the scenario considered: the EU15 countries gain in welfare because they get additional capital income from their foreign assets, while the non-EU15 countries gain in welfare because they can instantaneously raise their living standards. In our model, EU enlargement is a win-win process in the sense that it increases welfare gains from capital trade for both the EU15 and accession countries relative to the non-accession scenario. Finally, under the empirically plausible parameterisations, our model implies that the 2004 EU accession of the eight transition countries should not significantly affect the economies of the non-accession transition countries. The rest of the paper is organised as follows. Section 2 discusses the empirical relation between EU enlargements, foreign investment and border costs. Section 3 develops a dynamic multi-country general-equilibrium model of the EU enlargement where foreign investment is subject to border costs. Section 4 describes the methodology of the numerical study and presents the simulation results. Finally, Section 5 gives conclusions.

In this paper, we develop a dynamic general equilibrium model with the aim of studying the impact of EU enlargement on the economies of the EU15, the accession and the non-accession countries. We focus on one particular aspect of EU enlargement, which is the abolition of border costs for investing from the EU15 to the accession country. In a calibrated version of the model, we find that the effects associated with capital flows from rich EU15 countries to poor transition countries are very large: in the short-run, the EU15 investors can become owners of 70–80% of the total capital stock of the transition countries independently of whether such countries join the EU or not. How does this prediction agree with empirical evidence from transition economies? In the data, the presence of foreign capital in transition economies during the pre-accession period was not as large as predicted by the model but still fairly ample. For example, in 1999, the share of firms under foreign control in manufacturing employment in the Czech Republic, Poland and Hungary was 16.2, 18.6 and 46.5%, respectively; and, in 2000, the FDI stock in the Czech Republic, Hungary and Estonia was 42.6, 43.4 and 53.2% of their GDP, respectively; see Henriot (2003). The crucial difference between the non-accession and the accession scenarios in our model consists of the long-run outcomes: the presence of foreigners is only temporary in a non-accession country, whereas it is permanent in an accession country. This fact should be taken into account by policy makers: for example, an accession country might wish to artificially introduce some border costs in order to protect itself against an excessive presence of foreign capital in the long run. An interesting extension of our model would therefore be to endogenise border costs by making it a policy variable of an accession country. Our model implies that, for the non-EU15 countries, the short-run ranking of welfare is different to the log-run one. To be specific, in period t=0t=0, the non-EU15 countries prefer the accession scenario to the non-accession one, and they prefer the non-accession scenario to the autarkic one. However, after a few periods pass, the non-accession and the autarkic scenarios start yielding higher welfare for the non-EU15 country than does the accession scenario. (Recall that under the accession scenario, the accession country faces a permanent reduction in capital income because it looses the ownership of most of its capital.) Thus, if the non-EU15 country's government had an objective to maximise long-run welfare instead of welfare in t=0t=0 (for example, because the government does not discount future as consumers do), it would decide not to join to the EU. Concerning the EU15 countries, we do not have such a ranking reversal; the welfare for such countries is always larger under the accession scenario than under the non-accession one. Thus, governments of EU15 countries would be in favour of the EU enlargement independently of whether they maximise short-run or long-run welfare. Needless to say, our results should be treated with caution since our model abstracts from several potentially important issues. First, in our model, an accession country adopts the EU environment at the moment of accession (meaning that border costs are instantaneously and fully eliminated), while in reality, an accession country experiences complicated and gradual changes in its environment over the pre- and post-accession periods. Secondly, we assume that foreign and domestic capital are perfectly substitutable in production, while empirical evidence indicates that foreign capital creates positive spillovers in the domestic production, see, e.g., Görg and Strobl (2001). Thirdly, in our model, a high return on capital in transition countries is the only reason for foreign investment, while the empirical literature argues that foreign investment can also be a mean of extending control for reasons of corporate strategy, see, e.g., Graham and Krugman (1989), Markusen and Venables (1998), Ekholm et al. (2003). Finally, we are restricted to modelling the effect of the EU enlargement on border costs of foreign investment, while the EU enlargement has also a significant effect on migration, trade, etc. We leave extension of the model along these lines for future research.