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The Low-Hanging Fruit of the Single European Market: New Methods and Measures

Author

Listed:
  • Lionel Fontagne

    (Paris School of Economics)

  • Yoto Yotov

    (School of Economics, Drexel University)

Abstract

We propose and construct novel measures of the effectiveness and potential of trade blocs, combining estimation with granular data and simulation with a New Quantitative Trade Model. We deploy our methods and new indexes to quantify the potential benefits from (i) further integration within the largest and most successful trade liberalization effort in the world – the Single European Market – and (ii) a possible enlargement. Three main results and implications stand out from our analysis. First, European integration has been very effective in promoting trade among its members, with heterogeneous effects across industries and member states. Second, and most novel and important, our estimates reveal that only half of the potential benefits from EU membership have been realized to date. Third, EU accession will generate very large gains from trade for the new joiners and moderate gains for existing members, with larger benefits for some small and peripheral EU members. Importantly, our methods enable us to construct confidence bounds for the effects of EU enlargement.

Suggested Citation

  • Lionel Fontagne & Yoto Yotov, 2025. "The Low-Hanging Fruit of the Single European Market: New Methods and Measures," Working Papers 202522, Center for Global Policy Analysis, LeBow College of Business, Drexel University.
    • Handle: RePEc:drx:wpaper:202522
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    File URL: https://www.lebow.drexel.edu/sites/default/files/2025-04/202522-cgpa-low-hanging-fruit.pdf
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    References listed on IDEAS

    as
    1. Anderson, James E. & Yotov, Yoto V., 2016. "Terms of trade and global efficiency effects of free trade agreements, 1990–2002," Journal of International Economics, Elsevier, vol. 99(C), pages 279-298.
    2. Lionel Fontagné & Yoto V. Yotov & Lionel Gérard Fontagné, 2024. "Reassessing the Impact of the Single Market and Its Ability to Help Build Strategic Autonomy," CESifo Working Paper Series 11151, CESifo.
    3. Jeffrey M Wooldridge, 2010. "Econometric Analysis of Cross Section and Panel Data," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262232588, December.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    European Integration; Trade Costs; Trade Cost Efficiency; Single Market Potential;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions

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