Trade integration in Europe in the presence of unobservable barriers

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The aim of this article is twofold. First, it describes the methodology used to obtain a comprehensive dataset of inter-regional trade flows of goods in Europe, covering 2010–2018, 297 NUTS-2 (nomenclature of territorial units for statistics, level 2) regions for the EU27, the UK, Lichtenstein, Iceland, Norway and Switzerland, five transportation modes, 14 types of goods, and two units (tons and euros). The dataset is harmonised with the main country-to-country flows datasets. Second, drawing from the most recent developments in trade theory and the gravity equation, we identify and measure the ‘unobservable trade barriers’ (UTBs) still extant in the European Single Market (ESM). Employing recently developed structural gravity equations, we obtain new results on the deterrent effects of trade integration and administrative borders.