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Home sweet home: the home bias in trade in the European Union

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  • Mika, Alina

Abstract

This study examines the home bias in trade in goods and services within the European Union. Using the newest release of the World Input Output database, available for the years 2000-2014, the effect is estimated using gravity regressions. The trade-reducing effect of borders is found to be sizeable. It is greater for trade in services than for goods, though the former declined more markedly throughout the period. The paper extends current literature by demonstrating and analysing the variation in the bias across Europe. The border effect is larger in Central and Eastern Europe than in other parts of the continent. The differences in the effect can be largely explained by the depth of a country’s integration with the European Union. The number of years passed since a country joined the EU has a significant impact on the bias. The longer a country has been in the EU, the lower its home bias, with the first years of membership having the largest (in absolute terms) effect. JEL Classification: F02, F15, F14

Suggested Citation

  • Mika, Alina, 2017. "Home sweet home: the home bias in trade in the European Union," Working Paper Series 2046, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:20172046
    Note: 2654369
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    File URL: https://www.ecb.europa.eu//pub/pdf/scpwps/ecb.wp2046.en.pdf
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    References listed on IDEAS

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    2. Federico Inchausti-Sintes & Ubay Pérez-Granja, 2022. "Monetary policy and exchange rate regime in tourist islands," Tourism Economics, , vol. 28(2), pages 325-348, March.
    3. Garcia-Lazaro, Aida & Mistak, Jakub & Gulcin Ozkan, F., 2021. "Supply chain networks, trade and the Brexit deal: a general equilibrium analysis," Journal of Economic Dynamics and Control, Elsevier, vol. 133(C).
    4. Costas Hadjiyiannis & Doruk Iris & Chrysostomos Tabakis, 2018. "Consumer Nationalism and Multilateral Trade Cooperation," University of Cyprus Working Papers in Economics 10-2018, University of Cyprus Department of Economics.
    5. Irina-Marilena, Ban, 2022. "Introducing house prices to the intertemporal current account model: An application to the European Union," Economic Modelling, Elsevier, vol. 117(C).

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    More about this item

    Keywords

    border effect; European Union; gravity; trade;
    All these keywords.

    JEL classification:

    • F02 - International Economics - - General - - - International Economic Order and Integration
    • F15 - International Economics - - Trade - - - Economic Integration
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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