Estimating economic benefits of the Single Market for European countries and regions. Bertelsmann Stiftung Policy Paper, May 2019 Separate pdf Technical Appendix for Policy Paper Estimating economic benefits of the Single Market for European countries and regions

Abstract

This study provides insights into the economic benefits of the Eu- ropean Single Market (SM) for countries and regions across Europe. Specifically, we evaluate the impact of the trade boosting effects of the SM on productivity, markups, product variety, welfare and the dis- tribution of population across European countries and regions. We employ a model characterized by costly trade, love of variety, hetero- geneous firms, labour mobility as well as endogenous markups and productivity. The model is quantified using trade as well as GDP and population data for European countries and regions as well as other countries. We compute counterfactual economic changes stemming from changes in trade costs related to the SM. The findings suggest that on average, EU citizens’ per capita welfare gains from the SM amount to 840 euros per year. We uncover a strong heterogeneity of gains: Countries and regions in the geographic core of the EU see gains of up to 3,600 euros per capita (a 4.7% increase) while gains in some peripheral regions can be as small as 150 euros (about 2%). We also shed light on regional variation of welfare gains from the SM within individual EU countries