27 September 2017
Undoing Europe in a New Quantitative Trade Model
We estimate sectoral gravity models of trade to quantify the effects of various steps of European product market integration. We embed these results in a corresponding Ricardian general equilibrium trade model with input-output linkages to simulate the trade and welfare effects of a disintegration of the EU. We show that the welfare effects from the single market dominate, but that the gains from Schengen- and Eurozone membership are substantial for many countries as well. Bootstrapping standard errors, we find statistically significant effects for EU insiders while effects on EU outsiders are often insignificant. Percentage losses are more pronounced in more central EU members, while larger and richer countries tend to lose less. The effects of income transfers reveal some surprising patterns driven by terms-of-trade adjustments.
Last edited: 23 October 2017
Eurasian Economic Integration
International Institute for Applied Systems Analysis (IIASA)
Schlossplatz 1, A-2361 Laxenburg, Austria
Phone: (+43 2236) 807 0 Fax:(+43 2236) 71 313