Extending the Eu Single Market Eastwards: Sectoral Trade and Real Wage Effects

We predict the sectoral trade and real wage impact of free skilled migration in the enlarged EU, whose members we group as North (wealthiest EU), South (Greece, Portugal and Spain) and East (acceding Central and Eastern European countries). The North consolidates its current hub position by attracting more firms and skilled workers. Thus its net exports of high scale economy, skill-intensive goods increase and so do overall real wages. The South retains competitiveness in low scale economies, low skill-intensity sectors and sees an overall reduction in real wages. The East has a marginal gain in trade terms but suffers a real wage loss, albeit lower than that of the South.