Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/22711 
Year of Publication: 
2004
Series/Report no.: 
Dresden Discussion Paper Series in Economics No. 07/04
Publisher: 
Technische Universität Dresden, Fakultät Wirtschaftswissenschaften, Dresden
Abstract: 
EU enlargement offers significant welfare gains to old and new member states. However, these welfare gains do not come automatically but have to be earned by appropriate adjustments in domestic policies. This is particularly relevant for Germany's New Laender, which could benefit from the proximity to the new EU member states in Central and Eastern Europe but which also suffer particularly from inefficient institutions in Germany. Welfare gains will only be realised if wage adjustment is flexible. Instead, the German welfare system implicitly creates downward rigid wages. Without appropriate social policy reforms, the competitive pressure and the mobility of capital will destroy jobs in the New Laender. The paper shows the potential benefits and risks of economic integration in a simple partial equilibrium setting with flexible and rigid labour markets, respectively. We also discuss the entrepreneurial willingness and ability in the New Laender to adjust to the changing competitive conditions after EU enlargement.
Subjects: 
EU enlargement
labour markets
JEL: 
J3
H5
F2
Document Type: 
Working Paper

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