Europe integrates less than you think: Evidence from the market for corporate control in Europe and the US

National borders are still strong barriers for mergers and acquisitions in Europe. We estimate a gravity equation model based on NUTS 2-regions and find that the restraining impact of national borders decreased by about a third between 1990 and 2007. However, there has been no significant change since 1997, i.e., two years before the introduction of the Euro. To benchmark our results we run a corresponding analysis within the United States using the ten federal OMB regions as country equivalents. The 'quasi border'-effect in the US is weaker than in the EU and even declines more during the same time period. We conclude that European integration policy has little effect on fostering cross-border transactions.