Economics Commons^™

European countries have been working for fifty years to establish a single market. In at least one respect they have succeeded spectacularly: the number of participating countries has grown enormously since 1957. This 5th European Outlook examines the question whether the internal market has also succeeded in another respect, that is, in improving free trade, free investments and free migration between the participating countries. Looking back, the common market has clearly contributed to prosperity in Europe over the past fifty years. Looking ahead, there is scope for further market integration in Europe.

This paper argues that regulatory measures affect the fixed costs of entering a market as well as the variable costs of servicing that market. The study has explained that market entry barriers limit the number of firms that can break even in a particular market. The higher the entry barrier relative to the size of the market, the smaller the number of firms that can break even after having incurred the entry cost. In the face of such entry costs, trade liberalisation, defined as a reduction in variable trade costs, would under realistic assumptions lead to an increase in trade …