The objective of this paper is to investigate the trade potential of the fifteen old EU countries with the ten new members having joined on May 1st, 2004. Our focus lies not so much on the integration process already having taken place, but on the importance of institutional factors for trade. To this aim we estimate a standard gravity model applying both cross-section as well as static and dynamic panel data techniques. We conclude that there is further potential for trade resulting not from the formal accession to the EU, but rather from the successive alignment of the new members´ institutional frameworkto EU standards.
European integration gravity model trade potential institutions