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Factor Content of Bilateral Trade: The Role of Firm Heterogeneity and Transaction Costs

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Author Info
d'Artis Kancs
Pavel Ciaian

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Abstract

In this paper we study the determinants of the factor content of the CEE agricultural trade. Examining empirically three hypothesis, which relate cross-country differences in technology, relative factor abundance and transaction costs and market imperfections to the factor content of trade we find that the first two hypotheses are confirmed by the majority of developed EU countries, but rejected by roughly one half of the CEE transition country pairs. Second, we find that when accounting for transaction costs of farm (re)organization, both hypotheses are confirmed by the majority of the CEE country pairs. These findings provide empirical evidence of market imperfections, and particularly, of transaction costs of farm (re)organization in the CEE.

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File URL: http://www.econ.kuleuven.ac.be/licos/DP/DP2009/DP238.pdf
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Publisher Info
Paper provided by LICOS - Centre for Institutions and Economic Performance, K.U.Leuven in its series LICOS Discussion Papers with number 23809.

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Date of creation: 2009
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Handle: RePEc:lic:licosd:23809

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Related research
Keywords: Factor content; bilateral trade; relative factor abundance; technological differences; agriculture; transaction costs;

Find related papers by JEL classification:
F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies
F14 - International Economics - - Trade - - - Country and Industry Studies of Trade
D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
Q17 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agriculture in International Trade

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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. Yong-Seok Choi & Pravin Krishna, 2004. "The Factor Content of Bilateral Trade: An Empirical Test," Journal of Political Economy, University of Chicago Press, vol. 112(4), pages 887-914, August.
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  2. Lerman, Zvi, 2001. "Agriculture in transition economies: from common heritage to divergence," Agricultural Economics, Blackwell, vol. 26(2), pages 95-114, November. [Downloadable!] (restricted)
  3. d'Artis Kancs & Pavel Ciaian & Jan Pokrivcak, 2008. "Comparative Advantages, Transaction Costs and Factor Content of Agricultural Trade: Empirical Evidence from the CEE," EERI Research Paper Series EERI_RP_2008_03, Economics and Econometrics Research Institute (EERI). [Downloadable!]
    Other versions:
  4. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November. [Downloadable!] (restricted)
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  5. Debeare, Peter, 2003. "Relative Factor Abundance and Trade," Journal of Political Economy, University of Chicago Press, vol. 111(3), pages 589-610, June. [Downloadable!] (restricted)
  6. Staiger, Robert W., 1986. "Measurement of the factor content of foreign trade with traded intermediate goods," Journal of International Economics, Elsevier, vol. 21(3-4), pages 361-368, November. [Downloadable!] (restricted)
  7. Lee, Chinkook & Wills, Darryl & Schluter, Gerald, 1988. "Examining the leontief paradox in U.S. agricultural trade," Agricultural Economics, Blackwell, vol. 2(3), pages 259-272, November. [Downloadable!] (restricted)
  8. Olley, G Steven & Pakes, Ariel, 1996. "The Dynamics of Productivity in the Telecommunications Equipment Industry," Econometrica, Econometric Society, vol. 64(6), pages 1263-97, November. [Downloadable!] (restricted)
  9. Trefler, Daniel, 1995. "The Case of the Missing Trade and Other Mysteries," American Economic Review, American Economic Association, vol. 85(5), pages 1029-46, December. [Downloadable!] (restricted)
  10. Lai, Huiwen & Zhu, Susan Chun, 2007. "Technology, endowments, and the factor content of bilateral trade," Journal of International Economics, Elsevier, vol. 71(2), pages 389-409, April. [Downloadable!] (restricted)
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