Norway has seen "extensive Europeanisation" in the past 20 years despite being outside the EU, a government-commissioned report says.
In an analysis of Oslo's membership of the European Economic Area (EEA) the report says it is "an illusion" to consider Norway as outside the EU.
"We are almost as deeply integrated as the UK," says report committee chairman Prof Fredrik Sejersted.
Membership of the EEA gives Norway access to the EU's single market.
Norwegians have twice rejected European Union membership in referendums, preferring to join the EEA in 1994, in common with Iceland and Liechtenstein.
A recent opinion poll suggested that 76% of Norwegians wanted their country to remain outside the EU. They were a founder member of the European Free Trade Area in 1959.
An independent committee, chaired by Prof Sejersted, was set up by the Norwegian government two years ago to assess the country's membership of the EEA.
In a comprehensive analysis of Norway's 20 years in the European Economic Area, the report - "Outside and Inside" - finds deep implications for Norway's society, economy and democracy.
While it sees the economic benefits as largely positive, the report expresses concern at the political consequences as Norway is bound, in practice, to adopt EU policies "without voting rights".
Mr Sejersted calls this a "great democratic deficit... but this is a kind of national compromise since Norway decided it did not want to join the EU".
As Norway's integration with the EU intensified, he suggests that media, public and political understanding shrank.
"There are few areas of Norwegian democracy today where so many know so little about so much as is the case with Norwegian European policy," he says.
On the economic side, the report believes outcomes have been good - with rising national income, higher employment and higher incomes, not least because of Norway's oil and gas resources.
Norway is the world's fifth largest oil exporter, producing almost 2.5m barrels a day.
But the report also says the EEA has ensured "a stable and relatively predictable framework" for relations with the EU, its most important economic partner.
Norway signed up to a plethora of other EU agreements beyond the EEA, covering borders, immigration, foreign policy, agriculture, police co-operation and much else.
These are seen as having an impact on daily life - from vehicle inspections, the working environment and food quality to major structural issues such as the common labour market and the financial market.
Norway has adopted three-quarters of EU legislation amounting to 6,000 legislative acts.
Two-thirds of private sector investment go to Europe. And there have been high inward flows of EU immigrants into Norway.
Some British eurosceptics, including Conservative MEP Daniel Hannan, have argued that the UK should be like Norway, outside the EU, but according to this report Norway is both "outside and inside" the EU and just "one or two steps behind".