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On the Welfare Costs of Exclusion: the Case of Central Eastern Europe

  • Economics


In the past decade, we observed an acceleration of Western European integration, while the transition countries of Central Eastern Europe (CEE) have not become members of the EU. In this paper, we conduct numerical simulations on the consequences of such a kind of differential integration within the European economic region by a spatial model of endogenous growth. Special attention is paid to the welfare effects on insiders and outsiders, from a dynamic viewpoint (that is, accounting for different growth regimes and transition). The main finding is that successful transition does not seem to counterbalance the costs of exclusion for CEE.

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