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The Eu Eastern Enlargement And Fdi: The Implications From A Neoclassical Growth Model

Author

Listed:
  • Lilia Maliar

    (Universidad de Alicante)

  • Kateryna Garmel

    (National University "Kyiv-Mohyla Academy")

  • Serguei Maliar

    (Universidad de Alicante)

Abstract

This paper studies how the EU Eastern enlargement can affect the economies of the old and the new EU members and the non-acceded countries in the context of a multi-country neoclassical growth model where Foreign Direct Investment (FDI) is subject to border costs. We assume that in the moment of the EU enlargement border costs are eliminated between the old and the new EU member states but they remain unchanged between the old EU member states and the nonacceded 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 acceded countries, investors from the old EU member states become permanent owners of about 3/4 of capital, while in the nonacceded countries, they are forced out of business by local producers.

Suggested Citation

  • Lilia Maliar & Kateryna Garmel & Serguei Maliar, 2005. "The Eu Eastern Enlargement And Fdi: The Implications From A Neoclassical Growth Model," Working Papers. Serie AD 2005-29, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    • Handle: RePEc:ivi:wpasad:2005-29
    as

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    References listed on IDEAS

    as
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    Cited by:

    1. Garmel, Kateryna & Maliar, Lilia & Maliar, Serguei, 2008. "EU eastern enlargement and foreign investment: Implications from a neoclassical growth model," Journal of Comparative Economics, Elsevier, vol. 36(2), pages 307-325, June.

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    Keywords

    Foreign direct investment; EU enlargement; Neoclassical growth model; Transition economies; Three-country model;
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