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Trade Potential, Intra-industry Trade and Factor Content Revealed Comperative Advantage in the Baltic Sea Region

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  • Wirgrén, Mika
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    Abstract

    This paper investigates trade potential, intra-industry trade and comparative advantage in the Baltic Sea Region. The evaluation of region’s comparative advantage and intra-industry trade are based on the Balassa index of revealed comparative advantage and the Grubel-Lloyd index respectively. The analysis is carried out at HS 4-digit level. Trade potential is assessed using applying earlier versions of the gravity model of international trade. The actual trade flows analysis suggest that the BSR has reached its potential importance in intra-EU25+ (EU25, Norway and Russia) trade. In this respect the countries within BSR differ, however, considerably. BSR’s share falls considerably below its potential share in Russia’s, Latvia’s and Norway’s European exports. The overall conclusion in trade potential analysis is that the centre of gravity within BSR is likely to move gradually from Stockholm-Hamburg –axis somewhat to the east. The major part of the analysis concentrates on the factor intensities of the Baltic Sea Region’s comparative advantage and its overlap with a sample of other countries. The analysis demonstrates surprisingly big changes in some Baltic Sea Region’s countries specialisation patterns. The paper shows that in nearly all countries in the Baltic Sea Region the factor contents of revealed comparative advantage has shifted towards less physical capital intensive and more human capital intensive direction. Especially, Finland, Estonia and Poland are best examples in this respect. In 1996, the picture of the factor contents of the region’s comparative advantage was clearly polarised but there has been some convergence after that. In terms of intra-industry trace the region can be divided to the northern and southern triangles. The former consists of Finland, Sweden and Estonia and the latter of Germany, Denmark and Poland. These two are linked via Sweden.

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    Bibliographic Info

    Paper provided by The Research Institute of the Finnish Economy in its series Discussion Papers with number 1034.

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    Length: 26 pages
    Date of creation: 2006
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    Handle: RePEc:rif:dpaper:1034

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    Keywords: comparative advantage; factor intensity; Baltic Sea region;

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    References

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    1. Kaitila, Ville, 2004. "The Factor Intensity of Accession and EU15 Countries' Comparative Advantage in the Internal Market," Discussion Papers 925, The Research Institute of the Finnish Economy.
    2. Ville Kaitila, 2002. "Accession Countries’ Comparative Advantage in the Internal," International Trade 0209001, EconWPA.
    3. Kaitila, Ville & WidgrÉn, Mika, 1999. "Revealed Comparative Advantage in Trade between the European Union and the Baltic States," Discussion Papers 697, The Research Institute of the Finnish Economy.
    4. Damien NEVEN, 1994. "Trade Liberalisation with Eastern Nations. How Sensitive ?," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 9407, Université de Lausanne, Faculté des HEC, DEEP.
    5. Algieri, Bernadina, 2004. "Trade specialisation patterns: The case of Russia," BOFIT Discussion Papers 19/2004, Bank of Finland, Institute for Economies in Transition.
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