The Single Market, welfare and population size – an analysis of EU countries and regions

Generally, the growth accounting technique in economics separates economic growth into three components: capital, productivity and labour. The latter would be positively affected by population growth: the income gains generated by being part of the Single Market make the participating countries more attractive places to live as compared to countries outside the Single Market. Therefore, more people from the rest of the world would choose to live and work in Europe – and therefore, its population grows. Population growth again adds to economic growth and can thus exhibit an indirect or “second round” effect on economic growth. It is thus important to understand not just how the Single Market affects welfare through lifting barriers to trade, but also how the Single Market affects population sizes across Europe. This is of particular importance in most European countries, the ageing of their population is projected to reduce the labour force and thus also hamper economic growth.