[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/a/bla/reviec/v30y2022i4p915-938.html
   My bibliography  Save this article

EU integration and structural gravity: A comprehensive quantification of the border effect on trade

Author

Listed:
  • Julia Spornberger
Abstract
This study delivers a comprehensive picture of EU trade integration in manufactured goods using a structural gravity framework together with a flexible two‐step estimation approach. With panel data, time‐invariant effects on trade are typically absorbed by fixed effects. This paper shows how to include both time‐variant and time‐invariant effects on trade into general equilibrium counterfactual experiments. Results show that the time‐invariant effects or, in other words, the initial integration degree of the incumbent EU‐15 members should not be neglected as it already increased intra‐EU trade shares by 70% until 1995. Since then, trade integration has not deepened for the EU‐15, while trade shares among the newly joined central and eastern EU members doubled. A further deepening of the Single Market could potentially unlock another 50% increase in trade and around 3% in welfare (real income).

Suggested Citation

  • Julia Spornberger, 2022. "EU integration and structural gravity: A comprehensive quantification of the border effect on trade," Review of International Economics, Wiley Blackwell, vol. 30(4), pages 915-938, September.
    • Handle: RePEc:bla:reviec:v:30:y:2022:i:4:p:915-938
    DOI: 10.1111/roie.12589
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/roie.12589
    Download Restriction: no
    File URL: https://libkey.io/10.1111/roie.12589?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Volker Nitsch, 2000. "National borders and international trade: evidence from the European Union," Canadian Journal of Economics, Canadian Economics Association, vol. 33(4), pages 1091-1105, November.
    2. de Sousa, José & Mayer, Thierry & Zignago, Soledad, 2012. "Market access in global and regional trade," Regional Science and Urban Economics, Elsevier, vol. 42(6), pages 1037-1052.
    3. Marcel P. Timmer & Erik Dietzenbacher & Bart Los & Robert Stehrer & Gaaitzen J. Vries, 2015. "An Illustrated User Guide to the World Input–Output Database: the Case of Global Automotive Production," Review of International Economics, Wiley Blackwell, vol. 23(3), pages 575-605, August.
    4. Gabriel Felbermayr & Jasmin Gröschl & Thomas Steinwachs, 2018. "The Trade Effects of Border Controls: Evidence from the European Schengen Agreement," Journal of Common Market Studies, Wiley Blackwell, vol. 56(2), pages 335-351, March.
    5. Fernández-Val, Iván & Weidner, Martin, 2016. "Individual and time effects in nonlinear panel models with large N, T," Journal of Econometrics, Elsevier, vol. 192(1), pages 291-312.
    6. 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.
    7. Mario Larch & Joschka Wanner & Yoto V. Yotov & Thomas Zylkin, 2017. "The Currency Union Effect: A PPML Re-assessment with High-Dimensional Fixed Effects," CESifo Working Paper Series 6464, CESifo.
    8. James E. Anderson & Mario Larch & Yoto V. Yotov, 2018. "GEPPML: General equilibrium analysis with PPML," The World Economy, Wiley Blackwell, vol. 41(10), pages 2750-2782, October.
    9. Egger, Peter & Larch, Mario, 2008. "Interdependent preferential trade agreement memberships: An empirical analysis," Journal of International Economics, Elsevier, vol. 76(2), pages 384-399, December.
    10. Yotov, Yoto V., 2012. "A simple solution to the distance puzzle in international trade," Economics Letters, Elsevier, vol. 117(3), pages 794-798.
    11. J.M.C. Santos Silva & Silvana Tenreyro, 2010. "Currency Unions in Prospect and Retrospect," Annual Review of Economics, Annual Reviews, vol. 2(1), pages 51-74, September.
    12. James E. Anderson & Eric van Wincoop, 2003. "Gravity with Gravitas: A Solution to the Border Puzzle," American Economic Review, American Economic Association, vol. 93(1), pages 170-192, March.
    13. Pfaffermayr, Michael, 2020. "Constrained Poisson pseudo maximum likelihood estimation of structural gravity models," International Economics, Elsevier, vol. 161(C), pages 188-198.
    14. Fally, Thibault, 2015. "Structural gravity and fixed effects," Journal of International Economics, Elsevier, vol. 97(1), pages 76-85.
    15. de Sousa, José & Mayer, Thierry & Zignago, Soledad, 2012. "Market access in global and regional trade," Regional Science and Urban Economics, Elsevier, vol. 42(6), pages 1037-1052.
    16. Anderson, James E. & Borchert, Ingo & Mattoo, Aaditya & Yotov, Yoto V., 2018. "Dark costs, missing data: Shedding some light on services trade," European Economic Review, Elsevier, vol. 105(C), pages 193-214.
    17. Costas Arkolakis & Arnaud Costinot & Andres Rodriguez-Clare, 2012. "New Trade Models, Same Old Gains?," American Economic Review, American Economic Association, vol. 102(1), pages 94-130, February.
    18. Pfaffermayr, Michael, 2021. "Confidence intervals for the trade cost parameters of cross-section gravity models," Economics Letters, Elsevier, vol. 201(C).
    19. Bergstrand, Jeffrey H. & Larch, Mario & Yotov, Yoto V., 2015. "Economic integration agreements, border effects, and distance elasticities in the gravity equation," European Economic Review, Elsevier, vol. 78(C), pages 307-327.
    20. James E. Anderson & Yoto V. Yotov, 2010. "The Changing Incidence of Geography," American Economic Review, American Economic Association, vol. 100(5), pages 2157-2186, December.
    21. Benedikt Heid & Mario Larch & Yoto V. Yotov, 2021. "Estimating the effects of non‐discriminatory trade policies within structural gravity models," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 54(1), pages 376-409, February.
    22. Borchert, Ingo & Yotov, Yoto V., 2017. "Distance, globalization, and international trade," Economics Letters, Elsevier, vol. 153(C), pages 32-38.
    23. Jeffrey M Wooldridge, 2010. "Econometric Analysis of Cross Section and Panel Data," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262232588, April.
    24. María Pía Olivero & Yoto V. Yotov, 2012. "Dynamic gravity: endogenous country size and asset accumulation," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 45(1), pages 64-92, February.
    25. Harald Oberhofer & Michael Pfaffermayr, 2021. "Estimating the trade and welfare effects of Brexit: A panel data structural gravity model," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 54(1), pages 338-375, February.
    26. Daniel Trefler, 2004. "The Long and Short of the Canada-U. S. Free Trade Agreement," American Economic Review, American Economic Association, vol. 94(4), pages 870-895, September.
    27. Peter Egger, 2002. "An Econometric View on the Estimation of Gravity Models and the Calculation of Trade Potentials," The World Economy, Wiley Blackwell, vol. 25(2), pages 297-312, February.
    28. Egger, Peter & Larch, Mario, 2011. "An assessment of the Europe agreements' effects on bilateral trade, GDP, and welfare," European Economic Review, Elsevier, vol. 55(2), pages 263-279, February.
    29. Michael Pfaffermayr, 2019. "Gravity models, PPML estimation and the bias of the robust standard errors," Applied Economics Letters, Taylor & Francis Journals, vol. 26(18), pages 1467-1471, October.
    30. Egger, Peter & Nigai, Sergey, 2015. "Structural Gravity with Dummies Only," CEPR Discussion Papers 10427, C.E.P.R. Discussion Papers.
    31. Baier, Scott L. & Bergstrand, Jeffrey H., 2007. "Do free trade agreements actually increase members' international trade?," Journal of International Economics, Elsevier, vol. 71(1), pages 72-95, March.
    32. Windmeijer, F A G & Silva, J M C Santos, 1997. "Endogeneity in Count Data Models: An Application to Demand for Health Care," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 12(3), pages 281-294, May-June.
    33. Bo E. Honoré & Michaela Kesina, 2017. "Estimation of Some Nonlinear Panel Data Models With Both Time-Varying and Time-Invariant Explanatory Variables," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 35(4), pages 543-558, October.
    34. Egger, Peter H. & Nigai, Sergey, 2015. "Structural gravity with dummies only: Constrained ANOVA-type estimation of gravity models," Journal of International Economics, Elsevier, vol. 97(1), pages 86-99.
    35. Jonathan Eaton & Samuel Kortum, 2002. "Technology, Geography, and Trade," Econometrica, Econometric Society, vol. 70(5), pages 1741-1779, September.
    36. Tony Lancaster, 2002. "Orthogonal Parameters and Panel Data," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 69(3), pages 647-666.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Sertić Martina Basarac & Vučković Valentina & Andabaka Ana, 2024. "Examining the Effects of Trade Liberalisation Using a Gravity Model Approach," Economics - The Open-Access, Open-Assessment Journal, De Gruyter, vol. 18(1), pages 1-12, January.
    2. Steven Brakman & Tristan Kohl & Charles van Marewijk & Charles van Marrewijk, 2024. "DemoGravity: World Population and Trade in the 21st Century," CESifo Working Paper Series 11262, CESifo.
    3. Rodolfo G. Campos & Benedikt Heid & Jacopo Timini, 2024. "The economic consequences of geopolitical fragmentation: Evidence from the Cold War," Papers 2404.03508, arXiv.org.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Michael Pfaffermayr, 2020. "Trade creation and trade diversion of economic integration agreements revisited: a constrained panel pseudo-maximum likelihood approach," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 156(4), pages 985-1024, November.
    2. Scott L. Baier & Amanda Kerr & Yoto V. Yotov, 2018. "Gravity, distance, and international trade," Chapters, in: Bruce A. Blonigen & Wesley W. Wilson (ed.), Handbook of International Trade and Transportation, chapter 2, pages 15-78, Edward Elgar Publishing.
    3. Benedikt Heid & Mario Larch & Yoto V. Yotov, 2021. "Estimating the effects of non‐discriminatory trade policies within structural gravity models," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 54(1), pages 376-409, February.
    4. Felbermayr, Gabriel & Yotov, Yoto V., 2021. "From theory to policy with gravitas: A solution to the mystery of the excess trade balances," European Economic Review, Elsevier, vol. 139(C).
    5. Piermartini, Roberta & Yotov, Yoto, 2016. "Estimating Trade Policy Effects with Structural Gravity," School of Economics Working Paper Series 2016-10, LeBow College of Business, Drexel University.
    6. Mario Larch & Yoto V. Yotov, 2016. "General Equilibrium Trade Policy Analysis with Structural Gravity," CESifo Working Paper Series 6020, CESifo.
    7. Mulabdic, Alen & Rotunno, Lorenzo, 2022. "Trade barriers in government procurement," European Economic Review, Elsevier, vol. 148(C).
    8. Adu, Raymond & Litsios, Ioannis & Baimbridge, Mark, 2022. "ECOWAS single currency: Prospective effects on trade," Journal of International Money and Finance, Elsevier, vol. 126(C).
    9. Heid, Benedikt & Stähler, Frank, 2024. "Structural gravity and the gains from trade under imperfect competition: Quantifying the effects of the European Single Market," Economic Modelling, Elsevier, vol. 131(C).
    10. Díaz-Mora, Carmen & Esteve-Pérez, Silviano & Gil-Pareja, Salvador, 2023. "A re-assessment of the heterogeneous effect of trade agreements using intra-national trade flows," Economic Analysis and Policy, Elsevier, vol. 77(C), pages 940-951.
    11. Dimitrios Dadakas & Stavroula Tatsi, 2021. "Global agricultural trade impact of the 2011 triple disaster in Japan: A gravity approach," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 65(4), pages 937-972, October.
    12. Mario Larch & Serge Shikher & Constantinos Syropoulos & Yoto V. Yotov, 2022. "Quantifying the impact of economic sanctions on international trade in the energy and mining sectors," Economic Inquiry, Western Economic Association International, vol. 60(3), pages 1038-1063, July.
    13. Silviano Esteve-Pérez & Salvador Gil-Pareja & Rafael Llorca-Vivero & Jordi Paniagua, 2021. "Has the Euro paid off? A study of the trade-induced welfare effects of the EMU," Working Papers 2103, Department of Applied Economics II, Universidad de Valencia.
    14. Fontagné, Lionel & Santoni, Gianluca, 2021. "GVCs and the endogenous geography of RTAs," European Economic Review, Elsevier, vol. 132(C).
    15. Anderson, James E. & Yotov, Yoto V., 2020. "Short run gravity," Journal of International Economics, Elsevier, vol. 126(C).
    16. Anderson, James E. & Borchert, Ingo & Mattoo, Aaditya & Yotov, Yoto V., 2018. "Dark costs, missing data: Shedding some light on services trade," European Economic Review, Elsevier, vol. 105(C), pages 193-214.
    17. Erick Kitenge & Sajal Lahiri, 2022. "Is the Internet bringing down language‐based barriers to international trade?," Review of International Economics, Wiley Blackwell, vol. 30(2), pages 566-605, May.
    18. Michael Pfaffermayr, 2020. "Constrained Poisson pseudo maximum likelihood estimation of structural gravity models," International Economics, CEPII research center, issue 161, pages 188-198.
    19. Larch, Mario & Wanner, Joschka & Yotov, Yoto V., 2018. "Bi- and Unilateral trade effects of joining the Euro," Economics Letters, Elsevier, vol. 171(C), pages 230-234.
    20. Silviano Esteve‐Pérez & Salvador Gil‐Pareja & Rafael Llorca‐Vivero & José Antonio Martínez‐Serrano, 2020. "EMU and trade: A PPML re‐assessment with intra‐national trade flows," The World Economy, Wiley Blackwell, vol. 43(10), pages 2574-2599, October.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:reviec:v:30:y:2022:i:4:p:915-938. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=0965-7576 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.