Based on the gravity model by Baier and Bergstrand (2001), we use a static and dynamic panel data approach to estimate the relative contributions of income growth, income convergence, and the reductions in tariffs and trade costs to the growth of intra-EU trade over the period 1960 to 2000. The results suggest that income growth was the major force, accounting for approximately two third of total growth. Trade liberalization still had a sizeable effect, accounting de facto for the rest of growth, while income convergence played only a minor role. Reductions in trade costs had no significant effect on the growth of intra- EU trade. The results turn out as robust against several robustness checks and the use of alternative estimators.
|EI Working Papers / Europainstitut
- EI Working Papers / Europainstitut