Academic journal article Review of European Studies

The Effect of European Union Membership on Welfare

Academic journal article Review of European Studies

The Effect of European Union Membership on Welfare

Article excerpt

Abstract

We study the impact of EU membership on the per capita income, longevity and welfare of the member states. We utilize the concept of full income developed by Becker, Philipson and Soares (2005) which takes into consideration not only in the income level but also increase in the expected lifetime. Our results indicate that there is convergence among EU countries in per capita income, expected lifetime and welfare. Convergence speed is the highest in the per capita income whereas the slowest in the welfare. Moreover our estimations indicate that EU membership positively affects income, longevity, and welfare growth rates.

Keywords: European Union, convergence, full income, welfare

(ProQuest: ... denotes formulae omitted.)

1. Introduction

Main goal of European Union is the coordination and coherence in the economic, social, and political policies of its member states. Thus it forces certain policies on member states through variety of mechanisms. Assuming those enforced policies are "right policies" than we would expect that welfare of the countries improve after accession to the Union. Indeed even superficial observations suggest that membership speeds up the development pace of the countries. More methodological academic studies confirm those observations as well. Most of these studies conclude that latter members to the Union which are generally less developed ones catch up the former ones which are more developed on many economic indicators such as per capita income and inflation rate (Crespo-Cuaresma, Dimitz & Ritzberger-Gr?nwald, 2002).

EU can help member countries' development paces through variety of mechanisms. EU aims to establish a supranational union where member countries follow identical or very similar economic, social, and political policies. In this organization not only final goods would be traded between countries but also inputs of production and technology would be free to move (Macdonald, 1994; Caves & Barton, 1990; Lee, 1992).Those factors tend to improve the technology and efficiency (Kar & Ankan, 2003). Since all regulations are very similar, individuals and organizations are be able to enjoy benefits stemming from being in a large market including economies of scale and specialization.

Growth and development studies proved that good or bad institutions can have tremendous influence over the societies' development paces. Sometimes economic, social and cultural reasons prevent the establishment of good institutions locally. (Note 1) It has been argued that EU can help member or candidate countries to set up good institutions. Then good institutions speed up economic and social progress. Moreover EU's regulatory power provides an opportunity to internalize inter-country externalities, and help to achieve a sustainable development. Besides, EU subsidies on many sectors directly benefit member countries.

EU is not only an economic organization but also a social and political one. In fact Acquis regulates every aspect of the life in the member states. Thus we expect a significant influence of accession to the Union on many aspects of the life on the member states. Although economists have started to concentrate on the other aspects of welfare such as health, education, and freedom etc...most studies on EU focused on the economic effects. As it is known that there are many factors which affect the welfare, so the identification of welfare function is a very complex task. The Human Development Index (HDI) is one of the leading measurements of welfare, which is a weighted average of the life expectancy, years of schooling and per capita income. The data of the life expectancy index and education index are in terms of years, whereas income index is in terms of GNI per capita (PPP US$). Although HDI is an improvement over simple per capita numbers, the relative crudeness and ad hoc nature of it reduce its usefulness (Philipson & Soares 2001). …

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