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Europe’s Internal Market at Fifty: Over the Hill?

Author

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  • Straathof, B.

    (Vrije Universiteit Amsterdam, Faculteit der Economische Wetenschappen en Econometrie (Free University Amsterdam, Faculty of Economics Sciences, Business Administration and Economitrics)

  • Linders, G.J.M.

Abstract

For more than half a century, members of the European Union (EU) have pursued policies aimed at reducing the cost of cross- border transactions. Using a closed-form solution for the non-linear gravity system of Anderson and Van Wincoop (2003) we find that Internal Market policies have created trade between EU members, while diversion of trade with non members has been limited. Around 1995, 18 percent of total trade by EU15 countries can be attributed to the Internal Market. In the second half of the 1990’s the European advantage started to deteriorate relative to other trade flows: in 2005 the contribution of the Internal Market was just 9 percent. Most enlargements of the EU have had a positive impact on trade.

Suggested Citation

  • Straathof, B. & Linders, G.J.M., 2009. "Europe’s Internal Market at Fifty: Over the Hill?," Serie Research Memoranda 0055, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
    • Handle: RePEc:vua:wpaper:2009-55
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    References listed on IDEAS

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    Cited by:

    1. Alexandra Hudson & Bas Straathof, 2010. "The Declining Impact of Exchange Rate Volatility on Trade," De Economist, Springer, vol. 158(4), pages 361-372, November.

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    More about this item

    Keywords

    European Union; gravity equation; trade diversion;
    All these keywords.

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F10 - International Economics - - Trade - - - General

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