The Positive Effects of the Schengen Agreement on European Trade

Abstract

Enacted in 1985, the Schengen Agreement is widely heralded as both a symbol and major institutional advancement of the European project. By eliminating passport requirements for workers, the compact ostensibly produces gains from travel, ease of market access and economies of scale. Yet despite these optimistic predictions, scholars know little about the actual effects of Schengen on trade. We fill this void by identifying why labour mobility should expand the cross‐country exchange of goods and services and then test our theory with data from Europe spanning the period 1980 to 2011. We argue that labour mobility resulting from Schengen yields positive effects on trade by increasing demand for foreign goods, improving awareness of low‐cost producers abroad and lowering the risks associated with buying and selling outside the country. Using the gravity model of trade, we show empirically that Schengen membership makes European states more robust trading partners.

The Trade Effects of Border Controls: Evidence from the European Schengen Agreement

“…Overall, our findings suggest an ad valorem tariff equivalent markedly below the 3 per cent assumed by Aussilloux and Le Hir (2016) or Boehmer et al (2016), and Schengen effects for goods trade are clearly below the significantly larger long-run gravity estimates of previous studies such as Chen and Novy (2011), Davis andGift (2014), or Aussilloux andLe Hir (2016). This implies that the spatial dimension and thus the number of Schengen borders to cross along the transit route matters for the identification of the Schengen effect and is preferable over using a simple indicator variable.…”

“…Therefore, we use a count variable Schengen ij , t = {1, … , 8} registering the number of Schengen border crossings that land-borne trade between titi and j involves. 8 The existing literature (see, for example, Davis and Gift, 2014) is largely silent on the possibility that selection of country pairs into Schengen may not be random. The estimate of β would be upward biased if trade shocks ε ij , t > 0 increase the odds of a trade route connecting i and j to be affected by Schengen.…”

“…Hence, Schengen membership treats country pairs heterogeneously, depending on the number of internal Schengen borders crossed. This feature is ignored in the small existing literature, which treats Schengen analogously to trade agreements and currency unions, see, for example, Davis and Gift (2014) or Chen and Novy (2011).…”

A Neofunctionalist Perspective on the ‘European Refugee Crisis’: The Case of the European Border and Coast Guard

“…Schengen is commonly regarded as a ‘European success story’ (auf dem Brinke, , p. 3), or a ‘historic achievement […] that remains emblematic of the European values which tore down walls and united a continent’ (European Commission, ). The free movement of people is an integral part of Schengen and the Single Market which has often been regarded as the most substantial step in European integration (Davis and Gift, , p. 1). In addition, the free movement of people constitutes one of the, if not the , most concrete achievement(s) for EU citizens and is very popular with them.…”

21st Century Cooperation : Regional Public Goods, Global Governance, and Sustainable Development

“…The positive results of open borders for participating states are varied and include increasing migration and mobility of people, increasing ease of trade, and making states more robust trading partners in the international arena (Davis and Gift 2014). Some of the biggest challenges Schengen countries face today include the negative effect of strict visa regimes on tourism and surging numbers of illegal immigrants, which are putting pressure on a relatively young collective border management system.…”