Borders within Europe

Marta A. Santamaría, Jaume Ventura and Uğur Yeşilbayraktar

No 28301, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Are country borders still an impediment to trade flows within Europe? Using a rich microlevel survey with 3 million annual shipments of goods by road across 269 European regions, we construct a matrix of bilateral trade flows for 12 industries from 2011 to 2017. We then use the causal inference framework to design an identification strategy to estimate the causal effect of country borders on trade flows. Take two similar region pairs, the first one containing regions in different countries and the second one containing regions in the same country. The market share of the origin region in the destination region for the international pair is only 17.5 percent that of the intranational pair. We refer to this estimate as the average border effect. When we look at each industry separately, we find border effects that range from 12.3 to 38.9 percent. When we look at recent borders, i.e. created after 1910, we find a border effect of 28.8 percent, which is smaller than the average border effect but still quite large. The implication is clear: Europe is far from having a single market.

JEL-codes: D71 F15 F55 H77 O57 (search for similar items in EconPapers)
Date: 2020-12
Note: EFG IFM ITI PE POL
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Citations: View citations in EconPapers (4)

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