Working Paper: CEPR ID: DP15982
Authors: Keith Head; Thierry Mayer
Abstract: One of the pillars of the 1957 Treaty of Rome that ultimately led to the European Union is the commitment to the four freedoms of movement (goods, services, persons, and capital). Over the following decades, as the members expanded in numbers, they also sought to deepen the integration between themselves in all four dimensions. This paper estimates the success of these policies based primarily on a gravity framework. Distinct from past evaluations, we augment the traditional equation for international flows with the corresponding intra-national flows, permitting us to distinguish welfare-improving reductions in frictions from Fortress Europe effects. We complement the gravity approach by measuring the extent of price convergence. We compare both quantity and price assessments of free movement with corresponding estimates for the 50 American states.
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Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| EU integration policies (F15) | reduction in trade costs for goods (F19) |
| EU integration policies (F15) | reduction in migration costs (F16) |
| EU integration policies (F15) | reduction in capital flow costs (F32) |
| intra-EU trade (F19) | less costly relative to trading with the rest of the world (F14) |
| EU integration policies (F15) | increased openness to the rest of the world (F69) |
| EU membership (F36) | net gains from EU membership (F55) |
| cultural and institutional factors (O43) | impediments to migration (J61) |
| EU economic integration (F15) | levels of integration among 50 American states (F15) |