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The Trade Effects of Border Controls

Author

Listed:
  • Felbermayr, Gabriel
  • Gröschl, Jasmin
  • Steinwachs, Thomas

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 different country pairs differently, 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 per cent on average, on top of the EU's trade effects (equivalent to a drop in tariffs between 0.46 and 1.02 percentage points). Trade creation effects 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

  • Felbermayr, Gabriel & Gröschl, Jasmin & Steinwachs, Thomas, 2018. "The Trade Effects of Border Controls," Munich Reprints in Economics 58909, University of Munich, Department of Economics.
    • Handle: RePEc:lmu:muenar:58909
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    Cited by:

    1. Gabriel Felbermayr & Jasmin Gröschl & Marina Steininger, 2022. "Quantifying Brexit: from ex post to ex ante using structural gravity," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 158(2), pages 401-465, May.
    2. Ireneusz Pawel Karolewski & Roland Benedikter, 2017. "Europe’s Refugee and Migrant Crisis: Economic and Political Ambivalences," Challenge, Taylor & Francis Journals, vol. 60(3), pages 294-320, May.
    3. Jason Poulos & Andrea Albanese & Andrea Mercatanti & Fan Li, 2021. "Retrospective causal inference via matrix completion, with an evaluation of the effect of European integration on cross-border employment," LISER Working Paper Series 2021-07, Luxembourg Institute of Socio-Economic Research (LISER).
    4. Gabriel Felbermayr & Jasmin Katrin Gröschl & Benjamin Jung, 2017. "Deutschland seit dem Fall des Eisernen Vorhangs: Die Realeinkommenseffekte der zunehmenden Integration in die Weltwirtschaft," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 70(22), pages 30-37, November.

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    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F53 - International Economics - - International Relations, National Security, and International Political Economy - - - International Agreements and Observance; International Organizations

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