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The Trade Effects of Border Controls: Evidence from the European Schengen Agreement

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  • Gabriel Felbermayr
  • Jasmin Gröschl
  • Thomas Steinwachs

Abstract

The Schengen Agreement is an important milestone in the European integration process. The purpose is to facilitate the flow of goods, services, and persons across intra-European borders. How successful is it in achieving this goal? We apply an econometric gravity analysis to bilateral trade. Unlike earlier analysis, we acknowledge that Schengen treats di?erent country pairs di?erently, depending on their relative geographical location. Moreover, we find it crucial to carefully control for other elements of European integration such as membership in the customs union, the single market or the currency union, and to factor in countries' trade with themselves. Schengen has boosted trade by about 2.81% on average, on top of the EU's trade e?ects (equivalent to a drop in tari?s between 0.46 and 1.02 percentage points). Trade creation e?ects for services are stronger than for goods, but estimates feature larger parameter uncertainty. Peripheral countries benefit more than central ones. Other aspects of EU integration matter much more for trade than Schengen.

Suggested Citation

  • Gabriel Felbermayr & Jasmin Gröschl & Thomas Steinwachs, 2017. "The Trade Effects of Border Controls: Evidence from the European Schengen Agreement," Working Papers DP-2016-36, Economic Research Institute for ASEAN and East Asia (ERIA).
  • Handle: RePEc:era:wpaper:dp-2016-36
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Karmann Alexander & Rösel Felix & Schneider Markus, 2016. "Produktivitätsmotor Gesundheitswirtschaft: Finanziert sich der medizinisch-technische Fortschritt selbst?," Perspektiven der Wirtschaftspolitik, De Gruyter, pages 54-67.
    2. Campbell, Douglas L. & Chentsov, Aleksandr, 2017. "Breaking Badly: The Currency Union Effect on Trade," MPRA Paper 79973, University Library of Munich, Germany.
    3. Douglas L. Campbell & Aleksandr Chentsov, 2017. "Breaking Badly: The Currency Union Effect on Trade," Working Papers w0241, Center for Economic and Financial Research (CEFIR).

    More about this item

    Keywords

    Trade Integration; European Integration; Schengen Agreement; Gravity;

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F15 - International Economics - - Trade - - - Economic Integration
    • N74 - Economic History - - Economic History: Transport, International and Domestic Trade, Energy, and Other Services - - - Europe: 1913-
    • N94 - Economic History - - Regional and Urban History - - - Europe: 1913-

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