Publication

This report investigates the effects of EU enlargement on price convergence. The internal market is expected to boost integration and increase efficiency and welfare through a convergence of prices in product markets. The authors find that the enlargement has slightly stimulated the convergence process and this impact is robust across different groups of countries. Moreover, the authors explore driving forces of convergence. In line with theoretical predictions, the authors find that the rise in competition exerts a downward pressure on prices, while catching up of low income countries leads to a rise in price levels