Unlike in the research paper by Campos et al. (2014) that estimated for GDP per capita small negative effect that turned positive in the last treated years, the retrieved results in this thesis were positive, but statistically insignificant, for the whole post-treatment period43. Summing up, none of the GDP components showed negative effect of joining the EU on its values, which makes Slovakia the only country in the sample with only positive results that were, however, mostly statistically insignificant.
According to the European Commission (n.d.), from 2004 until 2017, the Slovak GDP per capita increased by 94%. Furthermore, Molendowski (2015) reports that in the first few years after entering the EU, Slovakia reached the highest GDP per capita growth.
Overall, Slovakia reached high level of GDP growth and managed to catch up with the rest of the V4 countries due to EU membership. On average, the GDP per capita increased in the post-treatment period due to the EU membership by 2 646 USD.
Molendowski (2015) further reports that Poland and Slovakia took the highest advantage from joining the EU. The increase of the GDP per capita was triggered by a large increase of FDI to industries, such as automobile and electronics that also led to decrease of unemployment (Žídek, 2011).
Summing up, by joining the EU, Slovak Republic experienced increase in its GDP per capita and the GDP components. After five years, Slovakia decided to access the eurozone, which attracted foreign investors, thus stimulated even further the foreign capital inflow and increase of the Slovak output level. Summing up, Slovak Republic was successful in the EU accession and reached the highest increase in GDP per capita from the V4 countries. Furthermore, Slovak GDP per capita level converged to the values generated for Czech Republic.
Results comparison
The last part of this chapter compares the EU accession estimates for GDP per capita and GDP components of the V4 countries. The results show positive effect on the GDP per capita for Czech Republic, Slovak Republic and partly for Poland. Negative effect was experienced only in Hungary.
43 The difference between the estimates is most likely caused by the longer post-treatment period used in this thesis. In the paper by Campos et al. (2014), the post-treatment period finished before the economic crisis.
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Additionally, the thesis aimed to detect the changes in the GDP components due to the EU accession and uncover the most affected components that led to the positive or negative change in the GDP per capita. Net export per capita largely increased in all treated countries. The results for the rest of the components showed mostly statistically insignificant and inhomogeneous results.
GDP per capita
The estimated effects on the GDP per capita were positive for Czech Republic, Slovakia, and partially for Poland. Only Hungary experienced statistically significant negative effects from joining the EU.
The below graphs show the average effect for GDP and its components retrieved for the post-intervention period44. According to the graph for the GDP per capita, on average, Slovak Republic experienced the highest impact on its GDP per capita level, which increased on average by 2 646 USD45. Second is the Czech Republic with average effect of 1 415 USD. For Poland, the effect was negative. On average, Poland would have reached a 314 USD higher GDP per capita if it did not join the EU.
However, in the last years of the EU membership, Poland started to experience positive effects on its GDP per capita level and therefore, we can assume that in the future, the positive effect may grow stronger. On the contrary, Hungary experienced on average drop of GDP per capita by almost 3 000 USD. Overall, the results for the GDP per capita were mostly statistically insignificant on 10% significance level. From the V4 countries, only Czech Republic experienced positive statistically significant change of its GDP per capita level for six post-treatment years. Hungary experienced negative effect that was statistically significant for two of the post-treatment years.
Export per capita
The obtained results and below graphs show that the main driving force of the GDP per capita growth is export per capita, which largely increased after the accession in all the studied countries. In the Czech Republic, Poland and Slovakia, the results for export per capita were statistically significant on 10% significance level for some of the post-treatment years. The highest effect for the export per capita was experienced in the
44 The effect illustrates the estimated difference between the real and synthetic values retrieved for the treated countries over the post-treatment period.
45 Nonetheless, the effect was not statistically significant on 10% significance level for any of the post-treatment year.
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Czech Republic, where the average post-treatment difference between the real and synthetic values of export per capita was 6 193 USD.
The retrieved results are consistent with the previous research papers that reckon export per capita being the main stimulant of the positive income growth. Furthermore, three of the four treated countries are mainly export oriented. The single market accession allowed for increased trade with the EU countries that are the main trading partners of the V4 countries. Furthermore, after the countries entered the EU, their export attractiveness, productivity and competitiveness increased.
Import per capita
Likewise, import per capita was also positively affected by the EU accession, however, the results were statistically significant on 10% significance level only for the Czech Republic and Poland. The highest effect of the EU accession on the import per capita was experienced by the Czech Republic, where the averaged post-treatment effect on the import per capita was 3 682 USD. Similarly to exports, the main reason behind the positive results for import per capita is the single market accession and increased trade with the rest of the EU members. Notably, all the treated countries experienced larger increase of export per capita compared to import per capita. Imports are already included in the rest of the GDP components (government spending, investment and private consumption), those GDP components experienced small changes after the EU enlargement and thus, the imports were less affected compared to exports per capita. As the obtained values for imports were lower than those retrieved for exports and therefore, we can summarize that the net export per capita was positively influenced by the EU accession and stimulated the growth of the GDP per capital levels in the treated countries.
Private consumption per capita
The results for private consumption per capita are ambiguous. Poland and Slovak Republic experienced growth of the private consumption due to entering the EU, nonetheless, in Slovakia the effect was experienced slightly before the accession date and in Poland, the positive effects were revealed after year 2010. The estimates for Czech and Hungarian private consumption per capita showed negative impact due to the EU accession. Overall, the highest difference in the private consumption and synthetic private consumption was measured in Slovakia, where the average effect was
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consumption effect was – 956 USD, therefore, if the country did not join the EU, its average private consumption per capita would be higher by almost 1 000 USD.In the pre-intervention period, Poland and Slovakia obtained the lowest value of GDP per capita. However, after entering the EU, the countries reached high GDP growth.
The EU accession with fast GDP growth and decrease in unemployment have positively influenced the private consumption per capita. Furthermore, the negative effect on private consumption per capita in Hungary can be assumed to the government cuts to lower its budget deficit, which negatively affected the household consumption.
Furthermore, similar cuts were introduced in the Czech Republic in 2011, when the Czech government decided to cut on the social benefits and salaries, thus the household consumption was also negatively influenced. Furthermore, due to the single market and free movement of people, some citizens of the V4 migrated to other EU countries to find better paid jobs. The migration might have negatively influenced the private consumption of the member countries.
To conclude, not any of the V4 countries experienced statistically significant change in the private consumption per capita level for more than one year. Therefore, we can summarize that the EU accession did not have a statistically significant effect on private consumption per capita in the V4 countries.
Government spending per capita
Overall, Poland and Slovakia experienced a small positive change of government spending per capita due to the EU accession. However, for Czech Republic and Hungary were estimated small negative effects of entering the EU on the government spending per capita level. Moreover, Hungarian government spending per capita was much higher in the first years after joining the EU and its values largely fell after the global crisis.
The highest effect on the government spending per capita was measured in Poland, where the average effect was 244 USD. The lowest value was measured for the Czech Republic, where the average government spending per capita would be higher by 416 USD if the country did not join the EU. The negative values obtained for Hungary are not surprising. The Hungarian government implemented several government spending cuts, which affected the government spending per capita values. The Czech Republic also introduced large government spending cuts during the post-global crisis period to
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lower its budget deficit. Moreover, the budget deficit for Slovakia and Poland was lower compared to the rest of the countries.
Summing up, even though the V4 countries experienced different post-treatment EU accession results for the government spending per capita, none of the V4 countries experienced statistically significant change in government spending per capita due to the EU accession.
Investment per capita
Last but not least, the variable investment per capita was the most volatile from the sample, which caused relatively low match of the variables in the pre-treatment period, thus the results for the Czech Republic and Slovakia lacked robustness and therefore, credibility.
The match was better for the other two countries. Both, Polish and Hungarian investment per capita fell after the EU accession. Although the results were not statistically significant on 10% significance level, the shape suggests there might had been some negative EU accession impact on the investment level of the above-mentioned countries. In the case of Hungary, the fall in investment per capita is not surprising due to its economic situation. Nonetheless, for Poland, the negative effect on investment per capita could had been caused by outflow of investment to other EU countries and the migration of the Polish citizens. Moreover, in the post-treatment period, the two countries had relatively high budget deficit compared to the Czech Republic and Slovakia.
To conclude, even though the graphs for the investment showed negative trend for two of the treated countries, the investment per capita did not experience statistically significance change due to the EU accession for any country in the V4 group.
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Results
Figure 39: Difference between the outcome variables and the synthetic estimates
Source: Author’s calculations
Overall, the biggest change in the GDP components was experienced by export per capita that increased for all the treated countries and for most of them, the results were statistically significant. The net export was the main driving force of the economic growth of the V4 countries. The importance of export per capita was highlighted by previous research. Billmeier and Nannicini (2013) claimed trade openness had positively influenced the GDP per capita in transitional economies. The V4 countries are mainly export oriented and the EU membership with introduction of the single market affected positively their export per capita values, which resulted in increased GDP per capita. The only exception was Hungary that experienced fall in its GDP per capita values. Even though the Hungarian export per capita increased after joining the EU, the sum of the decline in other GDP components was larger and caused the negative effects on the GDP per capita. Nonetheless, the negative effects for Hungary are not entirely caused by joining the EU but are the responsibility of bad policy decision-making.
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countries. Overall, the countries experienced positive EU accession impact on their GDP per capita and GDP components levels. The only exception was Hungary that experienced negative effect on its GDP per capita after entering the EU. Furthermore, the highest EU accession benefits were measure in the Czech Republic and Slovakia.According to European Commission (2009), the previously mentioned countries achieved the highest economic growth in the Eastern enlargement. The results also showed net export per capita to be the main driving force of the V4 countries’ economic growth.
The results of the analysis confirmed the previous research claiming EU accession positively influences the income level of the EU countries (Mann, 2015; Crespo Cuaresma et al., 2008; Badinger, 2005; Böwer & Turrini, 2010). While most of the previously mentioned authors focused on the past EU accessions, this thesis confirmed that similar positive effects were experienced by three out of four V4 countries. The impacts of the EU accession for Hungary were similar to those retrieved for Greece in the previous literature.
When looking at the 2004 enlargement, a research paper by Campos et al. (2014) estimated positive effects of the EU membership in the Czech Republic and partially for the last treated years in Slovakia. For the remaining two V4 countries, the effects were negative46. Therefore, the results estimated in this thesis are similar to those retrieved by Campos et al. (2014). Furthermore, Breuss (2001) estimated that Poland and Hungary will reach the highest benefits in terms of real GDP. This prediction was disproved by the current research as those two countries benefited less than Slovakia and Czech Republic. Notably, Czech Republic and Slovakia achieved relatively low budget deficit compared to Hungary and Poland. Furthermore, over the post-treatment period, Czech Republic and Slovakia received higher amount of FDI than the other two countries.
The estimates in this thesis complemented the previous research by introducing further analysis of the GDP per capita by creating SCM estimates for each of the GDP components. The GDP components analysis revealed net export per capita was the main
46 Nonetheless, the authors used short post-treatment period that finished before the global crisis and therefore, the positive effects for Poland were not measured.
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benefit from joining the EU. Furthermore, the analysis showed diverse results for the rest of the GDP components, therefore, the possible benefits from the EU accession are dependent on the economic environment of the member countries, not only on the dummy variable of EU accession. The main results of the SCM analysis are summarized in the table below.
Table 8: Results of the SCM analysis for the treated countries
Source: Author’s calculations
The results for Hungary revealed that the EU accession as itself is not a key to a successful and strong economic growth. Even though Hungary was firstly considered an outstanding EU candidate, the economic policy decisions and steps taken by the government regarding the budgetary issues caused that Hungary did not generate the same economic growth as the other countries did. This implies some considerations need to be made before joining the EU. The candidate country needs to be relatively stable and economically and budgetary ready to access the EU to benefit from the EU membership. Joining the EU as itself is not a direct ticket to a fast economic growth.
Secondly, the results showed that all four countries generated large increase in the net export per capita, which is the main factor behind the strong income growth after the EU accession. This shows that especially small and economically opened economies
47 P.c. refers to per capita.
Czech
Republic Hungary Poland Slovak
Republic GDP p.c.47 Positive Negative Positive after
2014 Positive
Export p.c. Positive x Positive Positive
Import p.c. Positive x Positive after
2013 Positive
Net export p.c. x Positive x x
Private cons. p.c. Negative Negative Positive Positive Government spend.
p.c. Negative Negative Positive Positive
Investment p.c. x Negative Negative x
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will benefit from the EU membership by increasing their exports. Nonetheless, the trade dependency can be also a disadvantage, especially during the economic crisis, when the exports and thus, GDP, fell in all the V4 group countries, but not in Poland that is less export dependent.
Poland is an interesting example of the EU accession. During its first years of the EU membership were measured none or slightly negative effects on the GDP per capita that turned positive after the global crisis, when Poland managed to avoid falling to recession and kept positive GDP growth. In the years before the crisis, Poland kept relatively low budget deficit, stable inflation and smooth output growth rate. All the economic reforms Poland took and the sound growth of the macroeconomic variables helped to avoid negative output growth. Even though the Polish exports increased after the EU accession, their change was not on average as high as for the other treated countries. Hence, generating the positive effects from the EU membership can take a relative long time, in the case of Poland, it took decade long period. Furthermore, the case of Poland shows that even larger countries can benefit from the EU membership.
The Eastern enlargement connected rich West with poorer East. The old EU member states had to give up their benefits from the EU budget that were allocated to the poorer states. The enlargement also caused migration from the new states to the old ones with higher living standards. In Poland, approximately one million people migrated to other EU states for work (Kolodziejczyk, 2016), which also had a positive effect on the unemployment level. Summing up, the specific economic and social environment of a potential candidate country needs to be considered before accepting the country’s application to join the EU.
Even though the Czech Republic had a relatively high GDP per capita value in comparison to the other V4 countries, it managed to generate statistically significant changes in its GDP per capita level in comparison to those countries with much lower GDP per capita. While the income convergence theory says the poorer countries will reach higher income growth, those countries with relatively higher income can also generate substantial growth of their GDP per capita, just as for the Czech Republic.
Matkowski and Próchniak (2007) found strong economic convergence among the V4 and the old fifteen member states, nonetheless the gap between the states remains large.
Furthermore, Matkowski and Próchniak (2007) found the treated countries to follow the cyclical fluctuation of the eurozone. This shows relative dependency of the V4 countries on the European Central Bank and the eurozone countries.