Consequences of capital drain among EU member states

Abstract

The aim of this article is to analyze the capital drain among individual European Union (EU) member states and its cohesive and political consequences. Since the capital drain has not yet been calculated at the individual country level, the methodological part of this article delves into this calculation in more detail. Between 1999 and 2018, Ireland and Luxembourg had the highest capital drain due to their tax haven policies. Apart from these extremes, Czechia experienced the largest capital drain during this period. Inequalities among EU member states were gradually decreasing in terms of gross domestic product and gross national disposable income, suggesting that the EU’s cohesion policy has partially been successful in reducing inequalities among EU countries. However, capital drain and its populist interpretations may become a significant political problem for the most negatively affected countries.