The Effect of EU Accession on Regional Income: Empirical Evidence from the Eastern Enlargement of the EU

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The purpose of this thesis is to investigate how the wage levels of the new EU members in Central and Eastern Europe have been affected by key steps in the early EU accession process and to assess whether wage convergence is likely to take place in the near future. The key steps of EU accession investigated are the 1996 Two Echelon Summit, the 1997 Luxembourg Summit and the 1999 Helsinki Summit. To carry out the empirical analysis, a model based on the so-called New Economic Geography theory is used. According to the results, the internal market potential is the most important factor in explaining a region’s wage level. Of the three key steps in the EU accession, only the 1999 Helsinki Summit had a significant effect on the wage levels in the accession countries. This effect is however very strong. Projections of possible future growth patterns for the EU region reveal that the increasing integration will be accompanied by a convergence in factor prices and income levels. This process is assessed to be faster for the wages within the EU region, for which a complete equalis...