Impacts of European Integration: Differences between Norway and Sweden

This bachelor's thesis explores the impacts of different forms of European integration on international trade. More specifically, it compares Sweden’s accession to the European Union (EU) and Norway’s participation in the European Economic Area (EEA). The main aim is to find out whether deeper EU integration has larger trade effects than the EEA and the statistical significance of the difference using bilateral import data from the EU15 partners for the time period 1992-2008. The analysis applies a structural gravity model estimated by PPML, enriched by country-pair and year fixed effects and time-varying integration dummies. It uses the data from the CEPII Gravity Database. The results show a clear effect on the international trade with the increase of imports to Sweden of 26,5 % in the growth phase and 64,9 % in the maturity phase, and an increase of imports to Norway of 13,7 % in the growth phase and 35,6 % in the maturity phase. Despite the EU effects being economically larger, the Wald tests do not detect a statistical significance at the conventional level. The findings are limited to aggregate goods trade and do not fully capture trade diversion.