Disintegration scenarios in the European Union: A case study of Eastern European economies

Abstract

This paper examines the progress of countries’ integration within the EU, and the expansion to include many Eastern European countries in this phenomenon. We create a multisectoral and multiregional input-output model (MRIO) to study a group of “counterfactuals” to evaluate the economic integration/disintegration phenomenon in this context. As an initial experiment, we conduct a study of the “non-integration” of Eastern European countries. On the basis of the MRIO model and, inspired by the synthetic indicators methodology and hypothetical extraction methods, we first study the trends in their trade relationships and technological and structural composition. Second, we design hypothetical scenarios based on the behavior observed in these trends to analyze the contribution of the disintegration process to economic growth and structural specialization. We find that Eastern Europe is highly vulnerable to the effects of trade with other European countries; the impact of a possible exit of Eastern countries would be almost three times greater for those countries than for the rest of Europe.