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Research Fellows Alasdair Smith and Anthony Venables
analyse the effects of `completing the internal European market' of 1992
in a model that takes account of imperfectly competitive markets and
economies of scale in production. They simulate the effects on ten
industries of, first, a reduction in intra-EC trade barriers equivalent
to a reduction in implicit tariffs by 2.5 percentage points, and second,
the elimination of firms' ability to engage in price discrimination
between different national markets. Smith and Venables find that the
simple reduction in intra-EC trade barriers generates only modest
welfare gains, but that much more substantial gains arise from the
integration of segmented national markets into a single European market.
The results of this research were discussed by Anthony Venables at a
lunchtime meeting reported earlier in this |
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