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Trade Growth in a Heterogeneous Firm Model: Evidence from South Eastern Europe

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  • d'Artis Kancs

Abstract

In 2007 a free trade area (BFTA) will be created in the Balkans. In this paper we study BFTA-induced trade growth in the SEE. Given that welfare impacts associated with trade growth depend on the growth channels, more goods and varieties exported or at higher price or more volume of exported goods and varieties, we study the structure of integration-induced export growth in the Balkans. Given that no firm-level trade data is available for the Balkans, we adopt the heterogeneous firm framework, which allows to decompose aggregate trade growth into intensive margin of trade and extensive margin of trade using only aggregate trade data. Our empirical findings predict that the BFTA would primarily increase the export volume through a growing number of shipments (the extensive margin of trade) suggesting that the actual welfare gains from the trade growth in the Balkans might in fact be larger than predicted in previous trade studies. We also found that reducing variable trade costs leads to higher export growth rates compared to reducing fixed trade costs by the same percentage. Copyright 2007 The Author Journal compilation Blackwell Publishing Ltd. .

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Bibliographic Info

Article provided by Wiley Blackwell in its journal World Economy.

Volume (Year): 30 (2007)
Issue (Month): 7 (07)
Pages: 1139-1169

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Handle: RePEc:bla:worlde:v:30:y:2007:i:7:p:1139-1169

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  1. James E. Anderson & Eric van Wincoop, 2004. "Trade Costs," NBER Working Papers 10480, National Bureau of Economic Research, Inc.
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  8. Andrew B. Bernard & Stephen J. Redding & Peter K. Schott, 2007. "Comparative Advantage and Heterogeneous Firms," Review of Economic Studies, Oxford University Press, vol. 74(1), pages 31-66.
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  16. Elhanan Helpman & Marc Melitz & Yona Rubinstein, 2006. "Trading Partners and Trading Volumes," DEGIT Conference Papers c011_022, DEGIT, Dynamics, Economic Growth, and International Trade.
  17. Hillberry, Russell H. & McDaniel, Christine A., 2002. "A Decomposition of North American Trade Growth since NAFTA," Working Papers 15866, United States International Trade Commission, Office of Economics.
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Citations

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Cited by:
  1. Kancs, d'Artis & Ciaian, Pavel, 2008. "Factor Content of Agricultural Trade," 2008 International Congress, August 26-29, 2008, Ghent, Belgium 44458, European Association of Agricultural Economists.
  2. Rosa Capolupo, 2012. "Economic Transition and Regional Growth: The Case of Albania and Comparator SEECs," Transition Studies Review, Springer, vol. 18(3), pages 529-549, March.
  3. d'Artis Kancs, 2010. "Structural Estimation of Variety Gains from Trade Integration in Asia," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 43(3), pages 270-288.
  4. Ciaian, Pavel & Kancs, d'Artis & Pokrivcak, Jan, 2011. "Comparative Advantages, Transaction Costs and Factor Content in Agricultural Trade: Empirical Evidence from the CEE - Vantaggi comparati, costi di transazione e contenuto dei fattori nel commercio agr," Economia Internazionale / International Economics, Camera di Commercio di Genova, vol. 64(1), pages 67-101.
  5. d’Artis Kancs & Pavel Ciaian, 2009. "The Factor Content of Heterogeneous Firm Trade," Working Papers 2009.6, International Network for Economic Research - INFER.
  6. James Anderson, 2001. "Migration, FDI, and the Margins of Trade," EERI Research Paper Series EERI_RP_2001_05, Economics and Econometrics Research Institute (EERI), Brussels.

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