Perspectives on Iberian Economic Integration

This paper examines the functioning of the European Single Market through the experience of Spain and Portugal, two economies whose geographical proximity, shared border and joint EU membership since 1986 make them a particularly informative case study. Organizing the analysis around the Single Market’s four freedoms, the paper combines descriptive indicators, structural-gravity estimates, a multi-country general-equilibrium trade model, price-convergence and electricity-coupling measures, administrative labour-market data, survival analysis and granular investment and banking data to assess integration in trade, energy, labour mobility and capital markets. The findings show that Iberian integration is substantial but markedly uneven across dimensions. Trade in goods and production network linkages have deepened considerably since accession, and wholesale electricity markets are exceptionally well integrated, reflecting strong complementarities between Spanish solar and Portuguese hydropower generation. By contrast, services trade, labour mobility and non-bank financial investment remain comparatively underdeveloped. These results show that the legal framework of the Single Market has generated deep integration in some markets while leaving others fragmented, and that closing the remaining gaps requires more effective implementation, regulatory cooperation and mutual recognition, supported by infrastructure investment and interoperable administrative systems.