IMF Working Papers

Economic Benefits from Deep Integration: 20 years after the 2004 EU Enlargement

By Robert C. M. Beyer, Claire Li, Sebastian Weber

February 21, 2025

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Format: Chicago

Robert C. M. Beyer, Claire Li, and Sebastian Weber. "Economic Benefits from Deep Integration: 20 years after the 2004 EU Enlargement", IMF Working Papers 2025, 047 (2025), accessed February 22, 2025, https://doi.org/10.5089/9798229001960.001

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

EU enlargement has stalled since the last member joined over ten years ago, marking the longest period without expansion since 1973. This elapsed time contrasts with the potential income gains membership promises. Drawing on the biggest EU enlargement in 2004 and employing a synthetic difference-in-difference estimator on regional data, we estimate that EU membership has increased per capita incomes by more than 30 percent. Capital accumulation and higher productivity contributed broadly equally, while employment effects were small. Gains were initially driven by the industrial sector and later by services. Despite substantial regional heterogeneity in gains—larger for those with better financial access and stronger integration in value chains prior to accession—all regions that joined the EU benefited. Moreover, existing members benefited too, with average income per capita around 10 percent higher. The estimated gains suggest that deep integration carries significant additional economic benefits beyond simple trade unions, providing valuable lessons for future EU enlargement and regional integration efforts elsewhere.

Subject: Balance of payments, Capital productivity, Debt default, Economic integration, Economic sectors, External debt, Foreign direct investment, Income, Income inequality, Industrial sector, Migration, National accounts, Population and demographics, Production, Productivity, Total factor productivity

Keywords: 2004 EU Enlargement, Capital accumulation, Capital productivity, Cyprus, Debt default, Deep Integration, Employment, Europe, European Union, Foreign direct investment, GDP Growth, Global, Income, Income inequality, Industrial sector, Migration, NUTS2 Regions, Organisation for Economic Co-operation and Development, Productivity, Total factor productivity, United States

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