We draw on trade theory to empirically explore the effects of value chain integration on producer price dynamics. Using the
EU as an example of an integrated area, we construct measures of backward and forward linkages with intra‐ and extra‐EU trading
partners at the country‐sector level. We find that especially upstream integration and EU accession dampen inflation. The
results for downstream integration indicate a price‐increasing relationship. We propose novel EU integration indicators and
offer insights to both theory and applied research. We also add to the policy debate on the price effects of (dis‐)integration
of EU countries.
Keywords:EU integration, Single Market, inflation, producer prices, value chains
Research group:Industrial, Innovation and International Economics