Trade Flows, Spatial Effects and Cohesion Policy in the EU Regions

The European Union has been pursuing economic integration and territorial cohesion jointly, but knowledge is limited on the interplay between trade flows and cohesion funds. The paper investigates the relationships between the two phenomena which are seldom considered in combination. To achieve this goal, the work applies a spatial panel origin-destination gravity model to data on regional bilateral trade flows and information on EU funds. Empirical analysis indicates that EU cohesion policy increases bilateral regional trade flows across Europe. The results also highlight that spatial interactions, both at the origin and at the destination, are important to understand regional trade flows. In policy terms, the study claims for the need of including trade aspects in the assessment of cohesion policy, and of coordinating policies for regional development with those for market integration.