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Predicting European Enlargement Impacts: A Framework of Interregional General Equilibrium

Although the Computable General Equilibrium (CGE) model is not a new tool in analyzing policy impact, it has not yet gained wide popularity in regional applications such as rural economies. This study demonstrates, however,that a regional CGE model can be a quite useful regional development planning tool for analyzing the impacts of changes in global economic conditions as well as for assessing the interregional and intersectoral implications of potential policy changes even with limited computational resources and lacking a full range of regional economic data required by a formal CGE analysis. In our empirical analysis we have found that the rural economies of the Central and Eastern European (CEE) accession countries have to expect the largest welfare gains from integration into the European Union (EU) in the case of gradual market opening in comparison with the continuation of current policy and the complete liberalization of markets. Because agricultural markets are highly protected in the EU, above all, the rural regions of the CEE countries will gain from integration into the EU.