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New Borders and Trade Flows: A Gravity Model Analysis of the Baltic States

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  • Darren Byers
  • Talan IÅŸcan

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  • Barry Lesser
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    Abstract

    The objective of this paper is to provide evidence on the effects of an economic and political union by studying the trade flows of the three Baltic countries of Estonia, Latvia and Lithuania after the breakup of the Soviet Union. We specify and estimate a gravity model of exports for the Nordic countries which enables us to determine the size and direction of trade flows in the Baltic states had they not been affected by the political institutions of the Soviet Union. Our results suggest that Baltic foreign trade was not only reduced significantly but also diverted to the members of the former Soviet Union. Consistent with our estimates, we also find that these consequences of the former political union are quickly dissipating, and the Baltic countries are increasing their share of exports to the European Union and the U.S. Copyright Kluwer Academic Publishers 2000

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    File URL: http://hdl.handle.net/10.1023/A:1008305213791
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    Bibliographic Info

    Article provided by Springer in its journal Open Economies Review.

    Volume (Year): 11 (2000)
    Issue (Month): 1 (January)
    Pages: 73-91

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    Handle: RePEc:kap:openec:v:11:y:2000:i:1:p:73-91

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    Web page: http://www.springerlink.com/link.asp?id=100323

    Related research

    Keywords: trade flows; gravity model; Baltic countries;

    References

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    1. Alan Deardorff, 1998. "Determinants of Bilateral Trade: Does Gravity Work in a Neoclassical World?," NBER Chapters, in: The Regionalization of the World Economy, pages 7-32 National Bureau of Economic Research, Inc.
    2. Deardorff, Alan V., 1984. "Testing trade theories and predicting trade flows," Handbook of International Economics, in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 1, chapter 10, pages 467-517 Elsevier.
    3. McCallum, John, 1995. "National Borders Matter: Canada-U.S. Regional Trade Patterns," American Economic Review, American Economic Association, vol. 85(3), pages 615-23, June.
    4. Jeffrey A. Frankel, 1997. "Regional Trading Blocs in the World Economic System," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 72.
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    Cited by:
    1. A. Porojan, 2001. "Trade Flows and Spatial Effects: The Gravity Model Revisited," Open Economies Review, Springer, vol. 12(3), pages 265-280, July.
    2. Claus-Friedrich Laaser & Klaus Schrader, 2004. "The Baltic States' Integration into the European Division of Labour," Kiel Working Papers 1234, Kiel Institute for the World Economy.
    3. Boris A. Portnov, 2005. "Development similarity based on proximity - a case study of urban clusters in Canada," ERSA conference papers ersa05p137, European Regional Science Association.
    4. Kiyong Keum, 2010. "Tourism flows and trade theory: a panel data analysis with the gravity model," The Annals of Regional Science, Springer, vol. 44(3), pages 541-557, June.
    5. Laaser, Claus-Friedrich & Schrader, Klaus, 2003. "Neue Partner in Europa : der baltische Außenhandel im Umbruch," Open Access Publications from Kiel Institute for the World Economy 3128, Kiel Institute for the World Economy (IfW).

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