# EU enlargements, Brexit and value-added trade: A structural gravity approach

## TL;DR

This paper analyzes how EU enlargements and Brexit affect value-added trade using a structural gravity model.

## Contribution

The study introduces a structural gravity approach to assess trade effects of EU enlargements and Brexit on value-added flows.

## Key findings

- EU enlargements increased value-added trade by approximately 13.9%.
- Brexit's impact varies based on countries' exposure to value-added trade with the UK.
- Results are robust across different datasets like TiVA and WIOD.

## Abstract

We revisit the topic of trade effects of past EU enlargements. We employ a structural gravity model to flows of domestic value added embedded in international trade and absorbed in the foreign final demand for the period of 1995–2018. Our model takes into account the current state of the art in estimation of gravity models: PPML estimation and multi-dimensional fixed effects. We base our estimations on the TiVA dataset and provide aggregate and sectoral estimates. Our results show stable estimates of EU enlargement on value-added trade of the order of 13.9% depending on the specification. These results are also robust to a choice of an alternative dataset (WIOD database). The advantage of our approach is the direct calculation of the trade impact on the GDP level. Based on these estimates we also provide quantitative insights into the effects of Brexit which varies depending on the country-specific exposure to the value added trade with the UK.