Welfare effects of 1992: A general equilibrium assessment for EC and EFTA countries

Abstract

Abstract. In this paper production, trade and welfare effects of European integration are discussed, with particular emphasis on the effects for the EC and EFTA. Insights from previous partial and general equilibrium analyses of the intemal market are reviewed, and new model simulations are presented. In addition to the "standard" experiments of 1992 -as reduced trade costs and as full market integration -for the EC alone, and for the European Economic Area (EEA), an intermediate case, with full integration in the EC but only lower trade costs between the EC and EFTA, is analysed. All cases show that EFTA will benefit significantly from freer trade and closer integration with the EC. With regard to non-European regions, the simulations of European integration show some degree of"trade diversion", but stylized model experiments indicate that a successful outcome of the Uruguay-round may more than offset the trade-diverting effects of 1992.JEL codes: D58, F12, F13, F15, F17.

Investment Creation and Diversion in Europe

“…The model identifies three primary factors of production: capital, skilled and unskilled labour; in addition intermediate goods are used as inputs in production. Haaland (1993) provides more details on the model structure and base-case data set.…”

“…The model is calibrated to the data set used in Haaland (1993). The calibration procedure is complicated, but essentially it solves the model in reverse, treating the endogenous variables (trade flows, market share, concentration, etc.)…”

The Accession of the UK to the EC: A Welfare Analysis

“…CGE trade models under imperfect competition have been used since the work of Cox and Harris on the US-Canada free trade area (1985), and that of Smith and Venables (1986), on closer integration in Europe. Such models have been widely used to assess the impact of North Amerian economic integration (De Melo and Tarr, 1992;Francois and Shiells, 1994); intra-European integration (Gasiorek et al, 1991(Gasiorek et al, , 1992Allen et al, 1998;Haaland, 1993), as well as regional integration beween and within other country groupings (Brown et al, 1997(Brown et al, , 2000. 2 In contrast, residual imputation or analytically more sophisticated econometric models typically focus on identifying the change in trade patterns arising from integration.…”