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Gravity Approach for Exploring Baltic Sea Regional Integration in the Field of International Trade

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Author Info
Paas, Tiiu
Abstract

The paper is inviting a reader to think to what extent we can use the knowledge resulting from laws of nature for exploring economic processes. In order to look for the answers on this question, the paper is going to explore international trade flows between the Baltic Sea region countries using a gravity approach. Attention is paid to analyzing forces that attract foreign trade flows and to exploring the influence of distance as an indicator that expresses both transportation costs and cultural proximity of the countries. The results of modeling support the statement that the size of economy has statistically significant and positive influence on the bilateral trade relations of the region. The influence of economic development level that is expressed by GDP per capita is statistically insignificant. In the case of the Baltic regional integration, distance is expressing most significantly cultural proximity and historical relationship between the countries. The regional integration effect in trade is inherently larger for small countries. Small economies in transition have to look for a regional niche to penetrate into the international market.

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Publisher Info
Paper provided by Hamburg Institute of International Economics in its series Discussion Paper Series with number 26379.

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Date of creation: 2002
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Handle: RePEc:ags:hiiedp:26379

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Keywords: International trade; gravity models; Baltic Sea region; International Relations/Trade; F10; C10;

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Fidrmuc, Jarko, 1999. "Trade Diversion in the 'Left-Outs' in the Eastward Enlargement of the European Union," Transition Economics Series 8, Institute for Advanced Studies. [Downloadable!]
  2. Deardoff, A.V., 1995. "Determinants of Bilateral Trade: Does Gravity Work in a Neoclassical World?," Working Papers 382, Research Seminar in International Economics, University of Michigan.
  3. Barry Eichengreen & Douglas A. Irwin, 1998. "The Role of History in Bilateral Trade Flows," NBER Chapters, in: The Regionalization of the World Economy, pages 33-62 National Bureau of Economic Research, Inc. [Downloadable!]
    Other versions:
  4. Simon J. Evenett & Wolfgang Keller, 1998. "On Theories Explaining the Success of the Gravity Equation," NBER Working Papers 6529, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  5. Wang, Zhen Kun & Winters, L. Alan, 1991. "The Trading Potential of Eastern Europe," CEPR Discussion Papers 610, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  6. James Harrigan, 2001. "Specialization and the volume of trade: do the data obey the laws?," Staff Reports 140, Federal Reserve Bank of New York. [Downloadable!]
    Other versions:
  7. Gros, Daniel & Gonciarz, Andrzej, 1996. "A note on the trade potential of Central and Eastern Europe," European Journal of Political Economy, Elsevier, vol. 12(4), pages 709-721, December. [Downloadable!] (restricted)
  8. Lancaster, Kelvin, 1980. "Intra-industry trade under perfect monopolistic competition," Journal of International Economics, Elsevier, vol. 10(2), pages 151-175, May. [Downloadable!] (restricted)
  9. Alan V. Deardorff, 1995. "Determinants of Bilateral Trade: Does Gravity Work in a Neoclassical World?," NBER Working Papers 5377, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  10. Claus-Friedrich Laaser & Klaus Schrader, 2002. "European Integration and Changing Trade Patterns: The Case of the Baltic States," Kiel Working Papers 1088, Kiel Institute for the World Economy. [Downloadable!]
  11. Helpman, Elhanan, 1981. "International trade in the presence of product differentiation, economies of scale and monopolistic competition : A Chamberlin-Heckscher-Ohlin approach," Journal of International Economics, Elsevier, vol. 11(3), pages 305-340, August. [Downloadable!] (restricted)
  12. Bergstrand, Jeffrey H, 1989. "The Generalized Gravity Equation, Monopolistic Competition, and the Factor-Proportions Theory in International Trade," The Review of Economics and Statistics, MIT Press, vol. 71(1), pages 143-53, February. [Downloadable!] (restricted)
  13. 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. [Downloadable!] (restricted)
  14. Krugman, Paul, 1998. "Space: The Final Frontier," Journal of Economic Perspectives, American Economic Association, vol. 12(2), pages 161-74, Spring. [Downloadable!] (restricted)
  15. 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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  16. John Whalley, 1996. "Why Do Countries Seek Regional Trade Agreements?," NBER Working Papers 5552, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  17. Helpman, Elhanan, 1987. "Imperfect competition and international trade: Evidence from fourteen industrial countries," Journal of the Japanese and International Economies, Elsevier, vol. 1(1), pages 62-81, March. [Downloadable!] (restricted)
  18. Krugman, Paul R., 1979. "Increasing returns, monopolistic competition, and international trade," Journal of International Economics, Elsevier, vol. 9(4), pages 469-479, November. [Downloadable!] (restricted)
  19. James E. Anderson & Eric van Wincoop, 2000. "Gravity with Gravitas: A Solution to the Border Puzzle," Boston College Working Papers in Economics 485, Boston College Department of Economics. [Downloadable!]
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  20. Anderson, James E, 1979. "A Theoretical Foundation for the Gravity Equation," American Economic Review, American Economic Association, vol. 69(1), pages 106-16, March. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Lammers, Konrad, 2002. "Die Osterweiterung aus raumwirtschaftlicher Perspektive - Prognosen regionalokonomischer Theorien und Erfahrungen aus der bisherigen Integration in Europa," Discussion Paper Series 26126, Hamburg Institute of International Economics. [Downloadable!]
  2. Enrique Martínez-Galán & Maria-Paula Fontoura & Isabel Proença, 2005. "Trade Potential In An Enlarged European Union: A Recent Approach," International Trade 0508011, EconWPA. [Downloadable!]
    Other versions:
  3. Isabel Proença & Maria Fontoura & Enrique Martínez-Galán, 2008. "Trade in the enlarged European Union: a new approach on trade potential," Portuguese Economic Journal, Springer, vol. 7(3), pages 205-224, December. [Downloadable!] (restricted)
  4. Theodora Kosma & Antonis Adam & James McHugh, 2003. "Trade Liberalization Strategies: What Could South Eastern Europe Learn From CEFTA and BFTA?," IMF Working Papers 03/239, International Monetary Fund. [Downloadable!]
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