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Trade liberalization and institutional reforms

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  • Angela Cheptea

    ()
    (Économie et Sociologie Rurales, INRA)

Abstract

The accession of Central and Eastern European (CEE) countries to the European Union (EU) is expected to lead to the new member countries becoming more like the older members, including in terms of trade. In this paper, we focus on two factors promoting CEE–EU trade integration: trade liberalization and institutional reforms. Measures of trade liberalization undertaken by both parties during the 1990s were very substantial, but did not always produce the expected upsurge of regional trade flows. Much less progress has been made in improving the functioning of CEE institutions (e.g., progress in the privatization process or in reducing corruption). Countries where most important changes at the institutional level occurred were also those that most increased their trade with the EU. Comparing the impact of these two factors, we find that improving institutions in CEE countries can generate as much trade as the removal of all tariff and non-tariff barriers. The paper also addresses the issue of the presence of reversed causality between trade and institutions, and the pro-trade effect of institutional similarity.

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Bibliographic Info

Paper provided by Institut National de la Recherche Agronomique, France in its series Working Papers with number 9457.

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Length: 211-255
Date of creation: 2007
Date of revision:
Publication status: Published in Economics of Transition
Handle: RePEc:inr:wpaper:9457

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Keywords: TRADE LIBERALIZATION; INSTITUTION; TRADE CREATION; CENTRAL AND EASTERN EUROPE;

References

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  1. Rodrik, Dani & Subramanian, Arvind & Trebbi, Francesco, 2002. "Institutions Rule: The Primacy of Institutions Over Geography and Integration in Economic Development," CEPR Discussion Papers, C.E.P.R. Discussion Papers 3643, C.E.P.R. Discussion Papers.
  2. Keith Head & Thierry Mayer, 2004. "Non-Europe : the magnitude and causes of market fragmentation in the EU," Cahiers de la Maison des Sciences Economiques, Université Panthéon-Sorbonne (Paris 1) bla99004a, Université Panthéon-Sorbonne (Paris 1).
  3. Baldwin, Richard, 1993. "The Potential for Trade Between the Countries of EFTA and Central and Eastern Europe," CEPR Discussion Papers, C.E.P.R. Discussion Papers 853, C.E.P.R. Discussion Papers.
  4. Daron Acemoglu & Simon Johnson & James A. Robinson, 2000. "The Colonial Origins of Comparative Development: An Empirical Investigation," NBER Working Papers 7771, National Bureau of Economic Research, Inc.
  5. Shang-Jin Wei, 1996. "Intra-National versus International Trade: How Stubborn are Nations in Global Integration?," NBER Working Papers 5531, National Bureau of Economic Research, Inc.
  6. James E. Anderson & Douglas Marcouiller, S.J., 1999. "Insecurity and the Pattern of Trade: An Empirical Investigation," Boston College Working Papers in Economics, Boston College Department of Economics 418, Boston College Department of Economics, revised 03 Aug 2000.
  7. Jeffrey D. Sachs & Andrew Warner, 1995. "Economic Reform and the Process of Global Integration," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(1, 25th A), pages 1-118.
  8. Antoine Bouët & Lionel Fontagné & Mondher Mimouni & Xavier Pichot, 2001. "Market Access Maps: A Bilateral and Disaggregated Measure of Market Access," Working Papers 2001-18, CEPII research center.
  9. McCallum, John, 1995. "National Borders Matter: Canada-U.S. Regional Trade Patterns," American Economic Review, American Economic Association, American Economic Association, vol. 85(3), pages 615-23, June.
  10. Trefler, Daniel, 1995. "The Case of the Missing Trade and Other Mysteries," American Economic Review, American Economic Association, American Economic Association, vol. 85(5), pages 1029-46, December.
  11. John F. Helliwell & Geneviève Verdier, 2001. "Measuring internal trade distances: a new method applied to estimate provincial border effects in Canada," Canadian Journal of Economics, Canadian Economics Association, Canadian Economics Association, vol. 34(4), pages 1024-1041, November.
  12. Koukhartchouk, Oxana & Maurel, Mathilde, 2003. "Accession to the WTO and EU Enlargement: What Potential for Trade Increase?," CEPR Discussion Papers, C.E.P.R. Discussion Papers 3944, C.E.P.R. Discussion Papers.
  13. Jansen, Marion & Nordås, Hildegunn Kyvik, 2004. "Institutions, Trade Policy and Trade Flows," CEPR Discussion Papers, C.E.P.R. Discussion Papers 4418, C.E.P.R. Discussion Papers.
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