The Economic Effects of Croatia's Accession to the European Union

We explore the economic implications of Croatia's possible accession to the European Union. We focus on two main changes associated with EU membership: accession to the internal European market and institutional reforms in Croatia triggered by EU membership. Consumption per capita in Croatia is estimated to rise by 2.6 percent as a result of accession to the internal market. In particular, the textile and wearing apparel sectors expand. If Croatia successfully reforms its domestic institutions in response to EU membership, income levels in Croatia could increase even more. Tentative estimates suggest that gross domestic product per capita in Croatia could rise by an additional 8 percent. Overall, the macroeconomic implications for the existing EU countries are negligible.