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On the patterns of trade convergence in European transition countries

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  • Tkachuk, Oleksandr
  • Popko, Denis

Abstract

In current study we analyze the convergence of trade between Central and Eastern European countries (CEECs) and European Union (EU) during the period from 1984 to 2004. In our extension of the theoretical framework of Helpman, Melitz and Rubinstein (2005) with heterogeneous firms we discuss the influence of economic fundamentals and trade cost on extensive and intensive margins of trade. Then, we use gravity model of trade to calculate potentials for CEECs trade with EU-15 countries. As a result, we develop convergence measures for CEECs exports and imports trade flows with EU-15. Moreover, we provide decomposition of trade flows on extensive and intensive margins, and construct convergence measures for each of the trade components. Finally, we analyze the mechanics of trade convergence process in selected CEECs. Current paper contributes to better understanding of trade convergence patterns in European transition countries, providing policy-makers in transition economies with useful insights on the role of different trade components in the convergence process.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 14109.

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Date of creation: Feb 2007
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Handle: RePEc:pra:mprapa:14109

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Related research

Keywords: trade convergence; gravity model; extensive and intensive margins; Hummels-Klenow decomposition;

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References

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  1. Kaminski, Bartlomiej, 2001. "How accession to the European Union has affected external trade and foreign direct investment in Central European economies," Policy Research Working Paper Series 2578, The World Bank.
  2. Ralf Ruhwedel & Michael Funke, 2005. "Export Variety and Economic Growth in East European Transition Economies," Quantitative Macroeconomics Working Papers, Hamburg University, Department of Economics 20502, Hamburg University, Department of Economics.
  3. Nilsson, Lars, 2000. "Trade integration and the EU economic membership criteria," European Journal of Political Economy, Elsevier, vol. 16(4), pages 807-827, November.
  4. David Hummels & Peter J. Klenow, 2002. "The Variety and Quality of a Nation's Trade," NBER Working Papers 8712, National Bureau of Economic Research, Inc.
  5. Baldwin, Richard & Taglioni, Daria, 2006. "Gravity for Dummies and Dummies for Gravity Equations," CEPR Discussion Papers, C.E.P.R. Discussion Papers 5850, C.E.P.R. Discussion Papers.
  6. Feenstra, Robert C, 1994. "New Product Varieties and the Measurement of International Prices," American Economic Review, American Economic Association, American Economic Association, vol. 84(1), pages 157-77, March.
  7. Elhanan Helpman & Marc Melitz & Yona Rubinstein, 2006. "Trading Partners and Trading Volumes," DEGIT Conference Papers, DEGIT, Dynamics, Economic Growth, and International Trade c011_022, DEGIT, Dynamics, Economic Growth, and International Trade.
  8. Gros, Daniel & Gonciarz, Andrzej, 1996. "A note on the trade potential of Central and Eastern Europe," European Journal of Political Economy, Elsevier, vol. 12(4), pages 709-721, December.
  9. Peter Egger, . "A Note on the Proper Econometric Specification of the Gravity Equation," WIFO Working Papers, WIFO 108, WIFO.
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Cited by:
  1. Richard Frensch, 2008. "Trade liberalisation, adoption costs, and import margins in CEEC and OECD trade," Working Papers, Institut für Ost- und Südosteuropaforschung (Institute for East and South-East European Studies) 269, Institut für Ost- und Südosteuropaforschung (Institute for East and South-East European Studies).

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