In this paper, we propose and test several extensions of the standard gravity model. This yields a specification that allows for (i) a more flexible income response; (ii) a competitiveness effect with a general and a specific component; and (iii) an alternative and consistent measure of remoteness. Those extensions were found to be significant factors to explain intra-EU trade. Next, we analyze the effect of EU harmonization of technical regulations on domestic and intra-EU trade. We find, at different levels of aggregation of the manufacturing sector, that harmonization of regulations has contributed to more intra-EU trade but, apparently, did not affect the so called border effect.
Keywords: Trade, EU countries, Gravity equation, Border effects
JEL Classifications: F11, F14, F15.
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1 Mark Vancauteren: Universiteit Hasselt, Faculty Business Econ (KIZOK), BE 3590 Diepenbeek, Belgium.
2 Daniel Weiserbs: Université catholique de Louvain, Faculté des sciences économiques, sociales, politiques et de communication, Place de l'Université B-1348 Louvain-la-Neuve, Belgium.