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What Determines Sectoral Trade in the Enlarged EU?

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Author Info
Helena Marques
Hugh Metcalf

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Abstract

In this paper, we estimate a sectoral gravity model for trade within a heterogeneous trade bloc, the enlarged EU, comprised of a high-income group (wealthiest EU), a middle-income group (Greece, Portugal and Spain), and a low-income group (new Central and Eastern European member countries). The estimation was conducted on sectors with different degrees of scale economies and skill-intensities in the presence of transport costs. The results offer support for the call to incorporate trade theories based on both endowments and scale economies. In addition, whilst integrating poorer countries is beneficial for all of the participants in the bloc, there is still a role for a redistribution policy, such as the EU's Regional Policy, which should comprise a mix of policies, focusing on both income and education/skills, together with infrastructure development. Copyright Blackwell Publishing Ltd 2005.

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Article provided by Blackwell Publishing in its journal Review of Development Economics.

Volume (Year): 9 (2005)
Issue (Month): 2 (05)
Pages: 197-231
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Handle: RePEc:bla:rdevec:v:9:y:2005:i:2:p:197-231

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  3. Vittas, H. & Mauro, P., 1995. "Potential Trade with Core and Periphery: Industry Differences in Trade Patterns," Papers 10, American Institute for Contemporary German Studies-.
  4. Maurel, Mathilde & Cheikbossian, Guillaume, 1998. "The New Geography of Eastern European Trade," Kyklos, Blackwell Publishing, vol. 51(1), pages 45-71.
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  5. Rice, Patricia & Stewart, Martin & Venables, Anthony J., 2002. "The Geography of Intra-Industry Trade: Empirics," CEPR Discussion Papers 3368, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  6. Jacques Melitz, 2003. "Geography, Trade and Currency Union," Working Papers 2003-25, Centre de Recherche en Economie et Statistique. [Downloadable!]
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  7. Baldwin, R.E. & Forslid, R. & Haaland, J.I. & Knarvik, K.H.M., 2000. "EU Integration and Outsiders. A Simulation Study of industrial Location," Papers 2/2000, Norwegian School of Economics and Business Administration-.
  8. Anthony J. Venables, 2001. "Geography and International Inequalities: the Impact of New Technologies," CEP Discussion Papers dp0507, Centre for Economic Performance, LSE. [Downloadable!]
  9. Havrylyshyn, Oleh & Pritchett, Lant, 1991. "European trade patterns after the transition," Policy Research Working Paper Series 748, The World Bank. [Downloadable!]
  10. Torsten Persson, 2001. "Currency unions and trade: how large is the treatment effect?," Economic Policy, CEPR, CES, MSH, vol. 16(33), pages 433-462, October. [Downloadable!] (restricted)
  11. Fritz Breuss & Peter Egger, 1999. "How Reliable Are Estimations of East-West Trade Potentials Based on Cross-Section Gravity Analyses?," Empirica, Springer, vol. 26(2), pages 81-94, June. [Downloadable!] (restricted)
  12. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-99, June. [Downloadable!] (restricted)
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  13. Claudia M. Buch & Daniel Piazolo, 2000. "Capital and Trade Flows in Europe and the Impact of Enlargement," Kiel Working Papers 1001, Kiel Institute for the World Economy. [Downloadable!]
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  14. Laszlo Matyas, 1997. "Proper Econometric Specification of the Gravity Model," The World Economy, Blackwell Publishing, vol. 20(3), pages 363-368, 05. [Downloadable!] (restricted)
  15. Wang, Z.K. & Winters, L.A., 1992. "The Trading Potential of Eastern Europe," Discussion Papers 92-21, Department of Economics, University of Birmingham.
  16. Limao, Nuno & Venables, Anthony J., 1999. "Infrastructure, geographical disadvantage, and transport costs," Policy Research Working Paper Series 2257, The World Bank. [Downloadable!]
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