Quantifying the Economic Effects of the Single Market in a Structural Macromodel
European Commission, Discussion Paper 094, February 2019; ISBN 978-92-79-77431-7
32 Pages Posted: 10 Jul 2019
Date Written: February 1, 2019
This paper examines the macro-economic benefits of the Single Market in goods and services by simulating a counterfactual scenario in which tariffs and non-tariff barriers are reintroduced. Model simulations show how the reintroduction of trade barriers in such a counterfactual would lead to significantly lower trade flows between the Member States. Lower trade openness also means reduced market size and less competition. Using empirical evidence on the effect of the Single Market on firms’ mark-ups over marginal costs, we add these effects to the direct trade effects to come to a total estimate of the economic benefits of the Single Market of between 8% and 9% higher GDP on average for the EU.
Keywords: Trade integration, European Union, Single market, General equilibrium
JEL Classification: F13, F14, F15, F17
Suggested Citation: Suggested Citation