The Impact of Technical Barriers to Trade on Home Bias : An application to EU data

The purpose of this paper is trying to estimate the impact of technical barriers to trade on bilateral trade flows of individual EU countries and to evaluate the downward impact of national border on trade flows (home bias). Here we try and identify the effect of technical barriers to trade on EU imports applied to data in which sectors where the EU has sought to introduce harmonized technical regulations to remove technical barriers to trade (New Approach, Old Approach, Mutual Recognition) as well as an aggregate of sectors for which technical barriers are deemed to be unimportant. Using the gravity model, we find that home bias remains substantial for products where the EU has sought to introduce harmonized technical regulations to remove technical barriers to trade but mutual recognition sectors exhibit the smallest home bias. Based upon the analysis on the evolution of home bias in the EU, we find no evidence that the home bias has decreased for products where differences in technical regulations are important.