The economic effects of the European Single Market Project:projections, simulations – and the reality

Abstract

Abstract This article reviews and critically analyzes the research on the economic impact of the European Single Market Project. The empirical findings are contrasted with policymakers' plans for economic integration and with the theoretical models of integration and econometric simulations that have been at the forefront of scholarly debate over the last fifteen years. The knowledge about the impact of the Single Market project on trade and investments is based on relatively sound findings. However, in general, there is little evidence supporting the channels of impact suggested by economic integration theory. The widespread notion of a'big bang'of liberalization is definitely inaccurate. Theoretical models and empirical simulations projected a process the impact of which would be broad, deep, and dynamic, but as the EU Commission concluded,'real life is rarely so simple'. There is no convincing empirical evidence of European integration having led to either short-term or sustained economic growth effects. The regulatory changes of the Single Market project were part of a global process of economic restructuring and mainly served to enhance the competitiveness of world-market oriented European companies. Keywords: European UnionEuropean integrationeconomic integrationeconomic integration theorysingle marketeconomic growth