The Credibility and Growth Effects of EU Institutions on Eastern Europe

This paper examines the additional advantages of membership of the Central and Eastern European countries in the European Union (EU) over the already advanced economic integration between the Union and its eastern neighbours. Besides transfers, further reductions in trade barriers and guaranteed market access, EU accession will enhance the credibility of economic reforms in the Central and Eastern European countries through the establishment of institutions common to the EU members. EU membership requires the transition countries to bring their legal, political and economic system into conformity with EU standards and to implement effectively the so-called acquis communautaire, which includes many institutional components that are crucial for the functioning of a market economy. The paper discusses the experience of institutional integration between nations at different stages of development and investigates the economic impact of institutional reform. Furthermore, the paper delineates an approach to estimate the growth effects of the acquis communautaire on the Central and Eastern European countries