THE PEACE DIVIDEND EFFECT OF TURKISH CONVERGENCE TO THE EU: A MULTI-REGION DYNAMIC CGE MODEL ANALYSIS FOR GREECE AND TURKEY

Abstract

This paper examines the peace dividend effect of Turkish convergence to EU membership. By employing a multi-region dynamic CGE model, we examine the prospect for conflict resolution if Turkey becomes an EU member. The model allows us to analyse several scenarios that imply varying amounts of reduction of the military expenditure/GDP ratios. On the one hand, this change will cause a decrease in sectoral demand for military expenditures, while on the other hand, reallocation of the reduced expenditure on (i) education, (ii) tax decrease, and (iii) infrastructure, should have a huge growth impact. Our dynamic CGE simulation experiments emphasize the economic gain for all parties involved.