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The authors are with the Research and European Departments of the IMF, respectively. Since writing the paper, Philip Schellekens has transferred to the World Bank’s East Asia and Pacific Department. The paper provides analytical background to the October 2008 Regional Economic Outlook: Europe. We thank Allan Brunner, Jai Chopra, and Luc Everaert for helpful comments. We also thank Pavel Lukyantsau, Dominique Raelison-Rajaobelina, and Thomas Walter for excellent research, administrative, and editorial assistance.
The NMS comprise Bulgaria, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, the Slovak Republic, and Slovenia.
Worker registration systems, for example, may not be able to ensure that workers deregister when they leave the destination country. This would cause the measure of inflows to be overstated.
Ireland attracted large migrant inflows from Lithuania, Poland, and Romania; the United Kingdom from various countries but especially Poland.
Other countries where restrictions were applied regarding access of Bulgarian and Romanian workers during the first stage of the transitory arrangements include: the Czech Republic, Cyprus, Estonia, Latvia, Lithuania, Poland, Slovenia, the Slovak Republic, and Finland.
Simple unweighted average of per capita income levels of Estonia, Latvia, and Lithuania to the EU-27.
In equilibrium, the sign of this term will depend not only on considerations of domestic versus foreign consumption, but also on the optimal size of aggregate (global) consumption and domestic aggregate investment. E.g., if in a given period it is optimal to increase consumption at the expense of investment, domestic resources can be sent to increase consumption abroad. In such a case, there is a net ‘wage income’ outflow from the model economy.
with higher productivity levels leading to a higher wage in the rest of the world. The relative price of nontradables in a steady state is determined by pN=AT/AN and, given our parameterization, is also higher in the rest of the world.
To see this, recall that b0=0 and, thus, in the first period of transition rb0=0 with any deviation between the trade balance and the current account being a result of wage remittance flows.
If labor flows out, the remaining labor force would have too much capital
In cases with a labor-leisure choice, employment may increase during booms, alleviating wage pressures.
Kaczmarczyk and Okolski (2008) report that most expenses by seasonal migrants who worked in Germany during 1998s-2000 fall under the category of current consumption.
Statistics Estonia, Labor Force Surveys.
These non-EU countries may soon however face similar problems of labor shortage.
Romania, e.g., launched initiatives to persuade Romanian construction workers to return home and fill domestic job vacancies.