What has determined the rapid post-war growth of intra-EU trade?

Based on the gravity model by Baier and Bergstrand (2001), we use a static and dynamic panel approach to estimate the determinants of the growth of intra-EU trade from 1960 to 2000. The results suggest that income growth was the major force, accounting for approximately two-thirds of total growth. Trade liberalization still had a sizeable effect, while other factors had only a little impact (income convergence, real effective exchange rate changes) or played no role (trade costs). Our estimation results for intra-EU trade, using a variety of extensions, underline the robustness of the Baier-Bergstrand cross-section findings for world trade. JEL no. C23, F12, F14, F15

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