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What Determines Sectoral Trade in the Enlarged EU?

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Author Info

  • Helena Marques

    ()
    (Loughborough University)

  • Hugh Metcalf

    ()
    (University of Newcastle-upon-Tyne)

Abstract

In this paper we estimate a sectoral gravity model for trade within a heterogeneous trade bloc, the enlarged EU, comprised of a high-income group (wealthiest EU), a middle-income group (Greece, Portugal and Spain), and a low-income group (acceding Central and Eastern European countries). The estimation was conducted on sectors with different degrees of scale economies and skill-intensities in the presence of transport costs. The results offer support for the call to incorporate trade theories based on both endowments and scale economies. In addition, whilst integrating poorer countries is beneficial for all of the participants in the bloc, there is still a role for redistribution policy. However, the EU’s Regional Policy, for example, should not be individual initiatives but should be a mix of policies, focussing on both income and education/skills, together with infrastructure development.

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Bibliographic Info

Paper provided by Department of Economics, Loughborough University in its series Discussion Paper Series with number 2003_8.

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Date of creation: Sep 2003
Date of revision: Sep 2003
Handle: RePEc:lbo:lbowps:2003_8

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Keywords: gravity model; trade; human capital; EU enlargement;

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References

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  1. Maurel, Mathilde & Cheikbossian, Guillaume, 1998. "The New Geography of Eastern European Trade," Kyklos, Wiley Blackwell, vol. 51(1), pages 45-71.
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  8. Black,Stanley W., 1997. "Europe's Economy Looks East," Cambridge Books, Cambridge University Press, number 9780521572422, October.
  9. Rice, Patricia & Stewart, Martin & Venables, Anthony J., 2002. "The Geography of Intra-Industry Trade: Empirics," CEPR Discussion Papers 3368, C.E.P.R. Discussion Papers.
  10. Jacques Melitz, 2003. "Geography, Trade and Currency Union," Working Papers 2003-25, Centre de Recherche en Economie et Statistique.
  11. Buch, Claudia M. & Piazolo, Daniel, 2001. "Capital and trade flows in Europe and the impact of enlargement," Economic Systems, Elsevier, vol. 25(3), pages 183-214, September.
  12. Fritz Breuss & Peter Egger, 1999. "How Reliable Are Estimations of East-West Trade Potentials Based on Cross-Section Gravity Analyses?," Empirica, Springer, vol. 26(2), pages 81-94, June.
  13. 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.
  14. Torsten Persson, 2001. "Currency unions and trade: how large is the treatment effect?," Economic Policy, CEPR & CES & MSH, vol. 16(33), pages 433-462, October.
  15. Anthony J. Venables, 2001. "Geography and International Inequalities: the Impact of New Technologies," CEP Discussion Papers dp0507, Centre for Economic Performance, LSE.
  16. Havrylyshyn, Oleh & Pritchett, Lant, 1991. "European trade patterns after the transition," Policy Research Working Paper Series 748, The World Bank.
  17. Limao, Nuno & Venables, Anthony J., 1999. "Infrastructure, geographical disadvantage, and transport costs," Policy Research Working Paper Series 2257, The World Bank.
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