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What Determines Sectoral Trade in the Enlarged EU?

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  • 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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  1. Baldwin, R.E. & Forslid, R. & Haaland, J.I. & Knarvik, K.H.M., 2000. "EU Integration and Outsiders. A Simulation Study of industrial Location," Papers, Norwegian School of Economics and Business Administration- 2/2000, Norwegian School of Economics and Business Administration-.
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  16. Buch, Claudia M. & Piazolo, Daniel, 2001. "Capital and trade flows in Europe and the impact of enlargement," Economic Systems, Elsevier, Elsevier, vol. 25(3), pages 183-214, September.
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