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Asymmetries in Heterogeneous Integrated Areas: Evidence from Intra-EU Sectoral Trade

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  • Helena Marques

    ()
    (University of Manchester)

Abstract

This paper estimates gravity models for both directions of trade between the EU-15 and the CEEC-10. The two groups form a heterogeneous integrated area (EU-27) with respect to country size, income levels, relative factor endowments and a different history of economic systems. The estimation was conducted on industries with different degrees of scale economies and factor-intensities in the presence of both spatial (distance and borders) and non-spatial (Eastern enlargements and Euro membership) trade costs. The results highlight the asymmetry in intra-bloc trade when the latter is heterogeneous: country size, income, factor endowments and the various trade barriers or facilitators are found to be significant determinants of intra-EU trade but to an extent that is country and industry-specific. The results also show how this heterogeneity eliminates the equivalence between exports and imports as the dependent variable in gravity models and makes the results sensitive to the definition of the bilateral flows to be estimated.

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File URL: http://www.infer-research.net/files_publications/WP2008_2.pdf
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Bibliographic Info

Paper provided by International Network for Economic Research - INFER in its series Working Papers with number 2008.2.

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Length: 21 pages
Date of creation: 2008
Date of revision:
Handle: RePEc:inf:wpaper:2008.2

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Related research

Keywords: asymmetry; gravity model; trade; EU enlargement;

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References

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  1. Donald R. Davis & David E. Weinstein, 1997. "Economic Geography and Regional Production Structure: An Empirical Investigation," Harvard Institute of Economic Research Working Papers 1802, Harvard - Institute of Economic Research.
  2. Yener Kandogan, 2008. "Falling walls and lifting curtains: analysis of border effects in transition countries," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 17(1), pages 85-104.
  3. Henriksen, E & Knarvik, K.H.M. & Steen, F., 2001. "Economies of Scale in European Manufacturing Revisited," Papers 12/2001, Norwegian School of Economics and Business Administration-.
  4. Black,Stanley W., 1997. "Europe's Economy Looks East," Cambridge Books, Cambridge University Press, number 9780521572422, April.
  5. Paul Grauwe & Frauke Skudelny, 2000. "The impact of EMU on trade flows," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 136(3), pages 381-402, 09.
  6. Davis, Donald R. & Weinstein, David E., 2003. "Market access, economic geography and comparative advantage: an empirical test," Journal of International Economics, Elsevier, vol. 59(1), pages 1-23, January.
  7. Robert C. Feenstra & James R. Markusen & Andrew K. Rose, 2001. "Using the gravity equation to differentiate among alternative theories of trade," Canadian Journal of Economics, Canadian Economics Association, vol. 34(2), pages 430-447, May.
  8. Helena Marques, 2008. "Trade And Factor Flows In A Diverse Eu: What Lessons For The Eastern Enlargement(S)?," Journal of Economic Surveys, Wiley Blackwell, vol. 22(2), pages 364-408, 04.
  9. Andrew K. Rose, 2000. "One money, one market: the effect of common currencies on trade," Economic Policy, CEPR & CES & MSH, vol. 15(30), pages 7-46, 04.
  10. Laszlo Matyas, 1997. "Proper Econometric Specification of the Gravity Model," The World Economy, Wiley Blackwell, vol. 20(3), pages 363-368, 05.
  11. Fratianni, Michele & Kang, Heejoon, 2006. "Heterogeneous distance-elasticities in trade gravity models," Economics Letters, Elsevier, vol. 90(1), pages 68-71, January.
  12. Christos Papazoglou & Eric J. Pentecost & Helena Marques, 2006. "A Gravity Model Forecast of the Potential Trade Effects of EU Enlargement: Lessons from 2004 and Path-dependency in Integration," The World Economy, Wiley Blackwell, vol. 29(8), pages 1077-1089, 08.
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Cited by:
  1. Tomasz Brodzicki, 2009. "Extended Gravity Panel Data Model of Polish Foreign Trade," Working Papers 0901, Economics of European Integration Department, Faculty of Economics, University of Gdansk, Poland.

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