A Spatial Perspective on European Integration: Heterogeneous Welfare and Migration Effects From the Single Market and the Brexit

Abstract

We use a quantitative model to study the implications of European integration for welfare and net migration flows across 1,280 European regions. The model suggests that an increase of trade barriers to the level of 1957 reduces welfare by about 5%–8% on average, depending on the presumed trade elasticity. However, remote regions may face initial welfare losses of up to 10%. These heterogeneous welfare effects cause estimated net migration of 1.9% of the population to the European geographic center implying that the dismantling of trade barriers in Europe has led to a more homogeneous spatial distribution of economic activity. With regard to the Brexit, we find moderate welfare losses for the United Kingdom of 1.05% in the most pessimistic scenario while continental Europe's welfare declines by 0.41%. (JEL F15, R12, R13, R23)

Rush Hours and Urbanization

“…5 Importantly, bilateral trade flows are available at the sector level which allows us to capture the price dimension by including sector fixed effects. Transforming these volume data into values by using unit prices from COMTRADE delivers similar estimates of the trade elasticity (Henkel and Seidel 2019). Notes: * * * , * * , * denote significance at the 1-, 5-, and 10-percent level, respectively.…”

Quo Vadis, Britain? – Implications of the Brexit process on the UK’s real economy

“…They also find that the UK's real income is likely to decline by between 1.4% and 5.7% under a hard Brexit scenario and that welfare effects for the EU are insignificant. Henkel and Seidel (2019) run a gravity-spatial model with labour mobility in two counterfactual exercises to study the impact of European integration on welfare and migration flows across 1,280 European regions. They estimate welfare losses for the UK of 1.05% and for the EU of 0.41% in the most pessimistic Brexit scenario.…”