Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/177643 
Year of Publication: 
2017
Series/Report no.: 
Tinbergen Institute Discussion Paper No. 17-075/VI
Publisher: 
Tinbergen Institute, Amsterdam and Rotterdam
Abstract: 
I develop an index for economic integration accounting for its gradual and bilateral nature: the Gradual And Bilateral Integration (GABI) index. The graduality captures differences in the depth and path of five stages in economic integration and is an improvement over the use of binary dummy variables. Its bilateral nature allows for country-pair differences, which is not possible with the multilateral indexes in existing literature. I apply the GABI index to a gravity model for 18 OECD countries and estimate the impact of the five stages on export. The estimates for these five stages allow me to investigate four different Brexit scenarios in a general equilibrium analysis, ranging from soft to very hard Brexit. I find that in the latter scenario real export of the UK decreases by a significant 32% in the long run. Other EU countries also experience a decrease in real export, while non-EU countries experience an increase due to trade diversion effects. Similarly, I also investigate potential future free trade agreements like TTIP.
Subjects: 
Balassa stages
economic integration
gravity model
Brexit
TTIP
JEL: 
F13
F14
F15
Document Type: 
Working Paper

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