The growth effects of Bulgaria and Romania’s EU accession: A synthetic control method examination

Objective: The article aims to evaluate the growth effects of the 2007 Eastern enlargement of the European Union (EU) for the New Member States (NMS). Research Design & Methods: To study the growth effects of the 2007 Eastern enlargement we apply the synthetic control method (SCM). The synthetic control method (SCM) is a statistical method that contains two groups: the treatment group that included Bulgaria and Romania and the control group that included Armenia, China, Egypt, India, Iran, Israel, Kazakhstan, Kyrgyzstan, Moldova, Morocco, Mexico, Montenegro, Malaysia, Russia, Serbia, Thailand, Tajikistan, and Turkey. These groups served to evaluate the effects of a treatment related to the EU accession. Findings: We found that the 2007 EU enlargement had substantial uninterrupted positive effects on the economic growth of Bulgaria and Romania. However, these effects have become noticeable only since 2014, seven years after the EU accession. Therefore, we should not expect that the EU accession immediately contribute to increased growth rates of the NMS. Implications & Recommendations: We demonstrate that the real GDP per capita of Bulgaria and Romania increased on average by 188 and 644 USD per year relative to their synthetic counterparts between 2007-2019, respectively. The actual yearly real GDP per capita growth rate for the same period in Bulgaria and Romania was 1.6% and 4.6% larger than the growth rate of these countries, respectively, if they did not become EU members in 2007. Therefore, our results support the positive growth effects of the EU accession. Contribution & Value Added: We focused on the effects of the second enlargement of the EU to the East that took place in 2007 and so far has not received substantial attention in the literature. Our results document the significant positive effects of the EU accession on the rates of growth in Bulgaria and Romania. Therefore, this article, at least to our knowledge, is the first article that focuses on estimating the growth effects of the 2007 EU enlargement.