Over time, European economic integration has become ever more comprehensive and complex, with a growing body of common legislation that is not easily translated into economic metrics. This project will evaluate and test empirically state of the art scientific approaches to measuring the scale and scope of economic integration, with the aim of improving empirical methods. European integration has recently been hit by various shocks such as Brexit, Trump’s trade wars, the COVID-19 pandemic, the competition from China, and from 2022 also the Ukraine war. We will examine these shocks and exploit information about them to generate new knowledge and identify the impact of economic integration on trade and investment in goods and services; e.g. Brexit is a natural experiment of (partial) disintegration that generates important new evidence. In the project, the trade impact of integration will be analysed with state-of-the-art empirical methods, supported by numerical models that shed light on the uneven impact of integration across countries and regions. While previous research on economic integration has largely focused on trade in goods, services and international investment will feature prominently in the project. We will use “microdata” at the firm level for selected countries to shed light on the interplay between trade and investment, and how this has been affected by integration. This is particularly important for services, that has become much more important over time and where a substantial share of exports is via affiliates abroad rather than cross-border trade. Services are essential inputs in value chains, and we will examine how EU legislation as well as recent shocks affect such value chains. The project runs from October 2021 through 2024 and is a newly established cooperation in the field between NUPI, Kiel Institute for the World Economy, University of Groningen and LSE (London School of Economics and Political Science).
During the first project year, new databases have been established for the further analysis to be undertaken in the project. This includes a new detailed database for EU’s foreign trade over 20 years; new data on the impact of Brexit; and new firm-level data for Norway’s foreign trade and investment. Several articles, including some about Brexit and some about the impact of sanctions against Russia, are in the making, with new results presented at various seminars and conferences in Norway, the Netherlands and Germany. Three articles have been submitted to peer-reviewed journals for publication, and one book chapter is forthcoming and will be published in January 2023.
This project establishes new cooperation between four important research institutions in Germany, UK, Netherlands and Norway, focusing on European economic integration. International economic integration has become more complex and comprehensive over time, but research lags behind and there is uncertainty about measurement and economic impact. Recently, the shocks of Brexit, Trump and Covid-19 have created new challenges and knowledge needs that the project aims to address, also exploiting new data created by these disruptions. The project aims to improve measurement and methods in the analysis of international economic integration. Organised in three works packages, WP1 will collate, compare and evaluate existing metrics on trade agreements, and deliver improved measures to be used in the project. Using disintegration to characterise the nature of integration, WP1 will also map changes in integration due to Brexit. WP2 analyses the impact of economic integration for countries and regions, using state of the art structural gravity and large-scale numerical models in tandem with empirical analysis to shed light on the economic impact of economic integration and the recent steps towards disintegration. WP2 will also shed light on the uneven impact of international economic integration across domestic regions; along with updated evidence on regional disparities in Europe. WP3 uses unique firm-level data for the four countries to examine the interaction between trade in goods, trade in services and international investment, thereby filling important knowledge gaps in research on integration. The results will provide evidence on the impact of Brexit and other trade policy changes, as well as the transition of European value chains for goods and services. Aiming for publications in high-quality journals and wide dissemination of results, the project aims to present novel and independent research guiding policy and research on important issues for the future of Europe.