The Impacts of the EU Enlargement on FDI Inflows

This paper estimates the economic impacts of the EU enlargement on the EU regions such as the EU-15, the CEEC-10, and Bulgaria-Romania. In additon, the paper estimates the impacts on the EU’s major trading partners such as Korea, Japan, and the United States. Unlike the previous studies, this study measures FDI inflows into Eastern Europe and also considers liberalization in the service sector. Major findings and implications from this study are as follows. First, the earlier expectation of huge inflows of FDI into the CEEC-10 and modest inflows into Bulgaria-Romania is verified empirically. Second, economic gains from the EU enlargement are expanded in member countries when liberalization in the services sector is considered. Third, the impacts of goods-and-services liberalization in the CEEC-10 and Bulgaria-Romania is not exaggerated greatly even when the Hoekman index is employed. Fourth, economic impacts of the EU enlargement on Korea, Japan, and the Unied Stats are minimal in terms of macro-economic variables.