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The Free Movement of Workers in an Enlarged European Union: Institutional Underpinnings of Economic Adjustment

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Labor Migration, EU Enlargement, and the Great Recession

Abstract

The eastern enlargements of the European Union (EU) in 2004, 2007 and 2013 created a labor market with more than half a billion people, third only to India and China in terms of population size and matched only by the United States in economic size. Along with the free movement of capital, goods and services, the acquis communautaire, basic legislation of the EU, also legally guarantee the free movement of people within the EU’s vast internal market. Owing to these liberalizations, and despite temporary transitional arrangements applied by some old member states towards citizens from new member states (NMSs), the EU witnessed a substantial east-west movement of people in the years following the eastern enlargements. The number of citizens in the old member states from the member states that joined the EU in 2004 and 2007 grew from about two million in 2004 to almost five million in 2009, signifying an increase from less than 0.5 to 1.2 % of the EU15 total population in just 5 years (Holland et al. 2011).

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Notes

  1. 1.

    As of 2014, the Euro Area includes Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia, and Spain. Although Bulgaria is not a member of the Euro Area, it has adopted a policy of a currency board and pegged the Leva to the Euro. The Danish Krone and Lithuanian Litas are also pegged to the Euro within the ERM II mechanism.

  2. 2.

    The EU’s fiscal capacity is defined by its rather limited budget, which was just about 1 % of the EU’s gross national income during the 2007–2013 Multiannual Financial Framework (Begg et al. 2008) and its role in determining the level of value added tax and tariffs on external trade. The Euro Area coordinates the fiscal policies of its member states through the Stability and Growth Pact.

  3. 3.

    The EU8 is composed of the EU member states from Central Eastern Europe that joined the EU in 2004: the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia, and Slovenia. EU10 denotes EU8 plus Cyprus and Malta, which also joined in 2004. EU8 + 2 denotes the combination of the EU8 plus the EU2, Bulgaria and Romania, which joined in 2007. The EU15 includes Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Spain, Sweden, and the United Kingdom.

  4. 4.

    The first version of the migration dataset was constructed for the study by Pedersen et al. (2008), covering 22 OECD destinations and 129 source countries from 1989 to 2000 (see the study for a description of the dataset). The second version of the dataset was extended to include 30 OECD countries and all world source countries, and the covered time period was lengthened to 1980–2010. This version has been used by Adserà and Pytliková (2015), which also provides a detailed description of the data.

  5. 5.

    The OECD International Migration Database provides data for six OECD countries (Chile, Israel, Korea, Mexico, the Russian Federation, and Turkey), whereas they are from Eurostat for nine other destinations (Bulgaria, Croatia, Cyprus, Estonia, Latvia, Lithuania, Malta, Romania, and Slovenia).

  6. 6.

    See applications of the theoretical model in Adserà and Pytliková (2015), Ortega and Peri (2009) and Grogger and Hanson (2011).

  7. 7.

    At income levels beyond dire poverty, migration increases, but when GDP reaches a certain level, migration may again decrease since the economic incentives for outmigration decline (Adserà and Pytliková 2015).

  8. 8.

    The analyses were also made for the sample of EEA destination countries only (i.e. excluding Australia, Canada, New Zealand, Switzerland, and the US), and the results are quantitatively very similar.

  9. 9.

    Furthermore, some destinations eased the working permit conditions for citizens from the new EU member states (despite maintaining the transitional employment restrictions of those workers), which could have also influenced migration from the new EU countries. Finally, some imperfect information could have existed regarding the specific rights and transitional measures of the free movement of workers.

  10. 10.

    The key assumption underlying the validity of our DD estimate is that differences in emigration rates between treated and not-treated groups would have remained constant in the absence of treatment. To test this assumption, we performed a graphical test and examined trends in log emigration rates across time for each destination, with a line for each source country. We could observe that migration trends into treated countries are similar to those into non-treated countries. The figures are available from the authors upon request.

  11. 11.

    As an additional robustness check, we performed “placebo” analyses, in which we restricted the time period to years 1995–2003, prior the first EU eastern enlargement. For the labor market openings, we “moved” the time, meaning we set the year 1997 instead of year 2004 and year 2000 instead of year 2007, and so on. The idea being that if there was a placebo “effect” from labor market opening or EU entry, there would be reason to be suspicious of the main estimates. The results validated our analyses presented above since none of the placebo estimates were statistically significant. The placebo analyses result tables are available from the authors upon request.

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Acknowledgements

Pytliková’s research was funded in part by the Czech Science Foundation grant (No. GA15-23177S) and by an SGS Research grant (No. SP2015/120). Martin Kahanec acknowledges the financial support of the Eduworks Marie Curie Initial Network Training Project (PITN-GA-2013-608311) of the European Commission’s 7th Framework Program.

Author information

Authors and Affiliations

  1. Central European University (CEU), Budapest, Hungary

    Martin Kahanec

  2. Institute for the Study of Labor (IZA), Bonn, Germany

    Martin Kahanec

  3. CELSI and NHF EU, Bratislava, Slovakia

    Martin Kahanec

  4. CERGE-EI, Prague, Czech Republic

    Mariola Pytliková

  5. Technical University, Ostrava, Czech Republic

    Mariola Pytliková

  6. IZA, Bonn, Germany

    Mariola Pytliková

  7. CELSI, Bratislava, Slovakia

    Mariola Pytliková

  8. Institute for the Study of Labor (IZA), University of Bonn, Bonn, Germany

    Klaus F. Zimmermann

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  1. Martin Kahanec
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  2. Mariola Pytliková
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  3. Klaus F. Zimmermann
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Correspondence to Martin Kahanec .

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Editors and Affiliations

  1. Department of Public Policy, Central European University, Budapest, Hungary

    Martin Kahanec

  2. IZA - Institute for the Study of Labor, Bonn, Germany

    Klaus F. Zimmermann

Appendix

Appendix

Table 5 Foreign population inflows: definitions and sources
Full size table
Table 6 Foreign population stocks: definitions and sources
Full size table
Table 7 Migration flows from 10 CEECs
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Table 8 Foreign population stocks from 10 CEECs
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Table 9 Descriptive statistics: definitions and sources
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Kahanec, M., Pytliková, M., Zimmermann, K.F. (2016). The Free Movement of Workers in an Enlarged European Union: Institutional Underpinnings of Economic Adjustment. In: Kahanec, M., Zimmermann, K.F. (eds) Labor Migration, EU Enlargement, and the Great Recession. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-662-45320-9_1

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  • DOI: https://doi.org/10.1007/978-3-662-45320-9_1

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