Abstract: Are country borders still an impediment to trade flows within Europe? Using a rich microlevel survey with 3 million annual shipments of goods by road across 269 European regions, we construct a matrix of bilateral trade flows for 12 industries from 2011 to 2017. We then use the causal inference framework to design an identification strategy to estimate the causal effect of country borders on trade flows. Take two similar region pairs, the first one containing regions in different countries and the second one containing regions in the same country. The market share of the origin region in the destination region for the international pair is only 17.5 percent that of the intranational pair. We refer to this estimate as the average border effect. When we look at each industry separately, we find border effects that range from 12.3 to 38.9 percent. When we look at recent borders, i.e. created after 1910, we find a border effect of 28.8 percent, which is smaller than the average border effect but still quite large. The implication is clear: Europe is far from having a single market.

Abstract: Spatial inequality within countries is high and rising. This paper assesses how much the 2004 enlargement of the European Union contributed to widening disparities in economic performance across cities in Europe. I develop a quantitative open-economy model of economic geography in which market integration spurs city growth. Trade occurs through urban hubs and generates positive spillovers for their local consumption amenities. As a result, removing barriers to trade causes economic activity and population to concentrate closer to urban hubs. I show that empirical evidence bears out qualitatively the theoretical predictions of my model. Quantitatively, my structural estimates imply that greater market integration caused by EU enlargement accounts for 26$\%$ of the observed increase in residents of the major cities in Central Europe.