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Non-Europe : the magnitude and causes of market fragmentation in the EU

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  • Keith Head

    ()

  • Thierry Mayer

    ()
    (TEAM)

Abstract

In 1985 the European Commission diagnosed its member states as suffering from excessive market fragmentation, a state of affairs it later referred to as "Non-Europe". In response, the European Union launched an ambitious program to unify its internal market by removing non-tariff barriers. We examine the empirical basis for the Commission's diagnosis using a trade model derived from monopolistic competition. We then investigate the links between the initial size and subsequent evolution of border effects within the European Union. Our findings support the view that European consumers act as if imports from other members were subject to high non-tariff barriers. However, there appears to be almost no relation between market fragmentation and the barriers that were identified and removed by Europe's Single Market Programme.

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Bibliographic Info

Paper provided by Université Panthéon-Sorbonne (Paris 1) in its series Cahiers de la Maison des Sciences Economiques with number bla99004a.

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Length: 37 pages
Date of creation: Jan 2004
Date of revision:
Handle: RePEc:mse:wpsorb:bla99004a

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Keywords: Borders; European Union; gravity; non-tariff barriers;

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References

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  1. Krugman, Paul, 1980. "Scale Economies, Product Differentiation, and the Pattern of Trade," American Economic Review, American Economic Association, vol. 70(5), pages 950-59, December.
  2. Holger C. Wolf, 1997. "Patterns of Intra- and Inter-State Trade," NBER Working Papers 5939, National Bureau of Economic Research, Inc.
  3. Gordon H. Hanson, 1998. "Market Potential, Increasing Returns, and Geographic Concentration," NBER Working Papers 6429, National Bureau of Economic Research, Inc.
  4. Haveman, J. & Hummels, D., 1997. "What Can We Learn from Bilateral Trade? Gravity and Beyond," Papers 97-002, Purdue University, Krannert School of Management - Center for International Business Education and Research (CIBER).
  5. 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.
  6. 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.
  7. Charles Engel & John H. Rogers, 1994. "How Wide is the Border?," NBER Working Papers 4829, National Bureau of Economic Research, Inc.
  8. John F. Helliwell, 1997. "National Borders, Trade and Migration," NBER Working Papers 6027, National Bureau of Economic Research, Inc.
  9. D. Neven & G. Norman & Jacques-Francois Thisse, 1991. "Attitudes toward Foreign Products and International Price Competition," Canadian Journal of Economics, Canadian Economics Association, vol. 24(1), pages 1-11, February.
  10. John F. Helliwell, 1995. "Do National Borders Matter for Quebec's Trade?," NBER Working Papers 5215, National Bureau of Economic Research, Inc.
  11. Neven, Damien J & Röller, Lars-Hendrik, 1990. "European Integration and Trade Flows," CEPR Discussion Papers 367, C.E.P.R. Discussion Papers.
  12. Anderson, Michael A & Smith, Stephen L S, 1999. "Do National Borders Really Matter? Canada-US Regional Trade Reconsidered," Review of International Economics, Wiley Blackwell, vol. 7(2), pages 219-27, May.
  13. Shang-Jin Wei, 1996. "Intra-National versus International Trade: How Stubborn are Nations in Global Integration?," NBER Working Papers 5531, National Bureau of Economic Research, Inc.
  14. Harrigan, James, 1996. "Openness to trade in manufactures in the OECD," Journal of International Economics, Elsevier, vol. 40(1-2), pages 23-39, February.
  15. Jonathan Eaton & Samuel Kortum, 1997. "Technology and Bilateral Trade," Boston University - Institute for Economic Development 79, Boston University, Institute for Economic Development.
  16. Smith, Alasdair & Venables, Anthony J., 1988. "Completing the Internal Market in the European Community: Some Industry Simulations," CEPR Discussion Papers 233, C.E.P.R. Discussion Papers.
  17. 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.
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