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Transitory Adjustment Costs and Long Term Welfare Effects of an EU-membership - The Norwegian Case

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Abstract

We employ a large scale macroeconometric model to study transitory adjustment problems and long term welfare effects of a Norwegian EU-membership. Compared to the present European Economic Area (EEA) treaty, accession would primarily require economic reforms in the fields of agriculture, public finance and trade. When we ignore the yearly net contribution of approximately 1 billion ECU (1 per cent of GDP), integrating the Norwegian economy into EU generates a small welfare gain. The results seem to be strongly affected by a long transition period with under-utilisation of resources. With the costs of the net contribution included, we identify a welfare loss. This is especially so if fiscal policy is adjusted to maintain public and current account balances. To investigate the stability of the results when the estimated wage rate response and trade elasticities are altered, we present two sensitivity tests. None of them give us reason to cast doubt on the qualitative conclusions presented.

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  • Einar Bowitz & Taran Fæhn & Leo A. Grünfeld & Knut Moum, 1995. "Transitory Adjustment Costs and Long Term Welfare Effects of an EU-membership - The Norwegian Case," Discussion Papers 150, Statistics Norway, Research Department.
    • Handle: RePEc:ssb:dispap:150
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    File URL: https://www.ssb.no/a/publikasjoner/pdf/DP/dp_150.pdf
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    Cited by:

    1. Sverre Grepperud, 1997. "Soil Depletion Choices under Production and Price Uncertainty," Discussion Papers 186, Statistics Norway, Research Department.

    More about this item

    Keywords

    European integration; EU participation; Macroeconometric modelling;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • F15 - International Economics - - Trade - - - Economic Integration
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission

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