Series: Occasional Papers. 2621.
Author: María Alejandra Amado Garfias, João Amador, Sónia Félix, Joana M. Garcia, Vanda Geraldes da Cunha, Corinna Ghirelli, Ángel Luis Gómez Jiménez, Eduardo Gutiérrez Chacón, Cristina Manteu, Luis Molina Sánchez, Enrique Moral-Benito, Sergio Puente Díaz, Javier Quintana González, Martín Saldías, Sharmin Sazedj, Sofia Terlica and Jacopo Timini
International Economy
- International trade
- Economic situation
- Financial markets
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Abstract
Rationale
Spain and Portugal share a border and have been members of the European Union since 1986, but to what extent do they function as a single market? The paper analyses bilateral integration in trade, energy, labour and finance, combining comparative indicators, microdata and structural models to identify the progress achieved, the differences across markets and the barriers that still persist.
Takeaways
- Integration between Spain and Portugal is strong in goods and has grown considerably since 1986, but remains weaker in services. Implicit barriers are equivalent to tariffs of 20% in manufacturing and over 100% in services.
- The wholesale electricity market is highly integrated: prices coincide in 95% of hours, one of the highest degrees of convergence among the European borders analysed.
- Migration between Spain and Portugal is low compared with other neighbouring European countries. This limited integration is observed among both workers and university students.
- Financial integration is particularly strong through the banking channel: bilateral banking exposures stand out relative to direct and portfolio investment.