Is the EU internal market suffering from an integration deficit?
AbstractAs an alternative to measuring the extent of market integration, ‘home-bias’ indicates the degree to which economic agents ‘over-prefer’ to transact with domestic agents rather than agents from other EU countries. Such an exclusive preference is measured against a benchmark of (ideal) market integration and is called ‘home-bias’. This CEPS Working Document by former CEPS Researcher Consuelo Pacchioli addresses the estimation of a ‘normal trade’ gravity equation to establish the possible existence of home-bias effects in the US market and the EU internal market, which are the two most integrated regions in the world. Estimations based on pooled OLS cross-section analysis, with the novelty of the inclusion of time dummies in order to obtain unique indexes and panel data-fixed effects, both reject the hypothesis of no internal barrier to trade. This shows a tendency to ‘over-trade’ within borders both in the US and the EU. Taking the finding for the US market as a benchmark, a direct comparison with the EU internal market is considered: the estimated results show that an average EU country still trades more within its borders than with other member states – about three to four times as much as a random US state does. A number of explanations are offered for this relatively low level of EU internal market integration.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Centre for European Policy Studies in its series CEPS Papers with number 5528.
Length: 31 pages
Date of creation: May 2011
Date of revision:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Keith Head & Thierry Mayer, 2004.
"Non-Europe : the magnitude and causes of market fragmentation in the EU,"
Cahiers de la Maison des Sciences Economiques
bla99004a, Université Panthéon-Sorbonne (Paris 1).
- Keith Head & Thierry Mayer, 2000. "Non-Europe: The magnitude and causes of market fragmentation in the EU," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 136(2), pages 284-314, June.
- Holger C. Wolf, 2000. "Intranational Home Bias In Trade," The Review of Economics and Statistics, MIT Press, vol. 82(4), pages 555-563, November.
- World Bank, 2007. "World Development Indicators 2007," World Bank Publications, The World Bank, number 8150, March.
- Volker Nitsch, 2000. "National borders and international trade: evidence from the European Union," Canadian Journal of Economics, Canadian Economics Association, vol. 33(4), pages 1091-1105, November.
- repec:dar:vpaper:34476 is not listed on IDEAS
- James E. Anderson & Eric van Wincoop, 2000.
"Gravity with Gravitas: A Solution to the Border Puzzle,"
Boston College Working Papers in Economics
485, Boston College Department of Economics.
- James E. Anderson & Eric van Wincoop, 2003. "Gravity with Gravitas: A Solution to the Border Puzzle," American Economic Review, American Economic Association, vol. 93(1), pages 170-192, March.
- James E. Anderson & Eric van Wincoop, 2001. "Gravity with Gravitas: A Solution to the Border Puzzle," NBER Working Papers 8079, National Bureau of Economic Research, Inc.
- Anonymous, 2007. "Indicators February-07," Amber Waves, United States Department of Agriculture, Economic Research Service, February.
- Anonymous, 2007. "Indicators September-07," Amber Waves, United States Department of Agriculture, Economic Research Service, September.
- Chen, Natalie, 2004.
"Intra-national versus international trade in the European Union: why do national borders matter?,"
Journal of International Economics,
Elsevier, vol. 63(1), pages 93-118, May.
- Chen, Natalie, 2002. "Intra-national versus International Trade in the European Union: Why do National Borders Matter?," CEPR Discussion Papers 3407, C.E.P.R. Discussion Papers.
- Anonymous, 2007. "Indicators June-07," Amber Waves, United States Department of Agriculture, Economic Research Service, June.
- John F. Helliwell, 1996.
"Do National Borders Matter for Quebec's Trade?,"
NBER Working Papers
5215, National Bureau of Economic Research, Inc.
- Bergstrand, Jeffrey H, 1985. "The Gravity Equation in International Trade: Some Microeconomic Foundations and Empirical Evidence," The Review of Economics and Statistics, MIT Press, vol. 67(3), pages 474-81, August.
- Russell Hillberry & David Hummels, 2003.
"Intranational Home Bias: Some Explanations,"
The Review of Economics and Statistics,
MIT Press, vol. 85(4), pages 1089-1092, November.
- Narcissa Balta & Juan Delgado, 2009. "Home Bias and Market Integration in the EU," CESifo Economic Studies, CESifo, vol. 55(1), pages 110-144, March.
- Anonymous, 2007. "Indicators April-07," Amber Waves, United States Department of Agriculture, Economic Research Service, April.
- Anonymous, 2007. "Indicators November-07," Amber Waves, United States Department of Agriculture, Economic Research Service, November.
- Anderson, James E, 1979. "A Theoretical Foundation for the Gravity Equation," American Economic Review, American Economic Association, vol. 69(1), pages 106-16, March.
- Juan Delgado, 2006. "Single market trails home bias," Policy Briefs 38, Bruegel.
- Aitken, Norman D, 1973. "The Effect of the EEC and EFTA on European Trade: A Temporal Cross-Section Analysis," American Economic Review, American Economic Association, vol. 63(5), pages 881-92, December.
- McCallum, John, 1995. "National Borders Matter: Canada-U.S. Regional Trade Patterns," American Economic Review, American Economic Association, vol. 85(3), pages 615-23, June.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Margarita Minkova).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.