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Free Trade between the EU and Russia - Sectoral Effects and Impacts on Northwest Russia

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  • Kaitila, Ville

Abstract

We analyse the implications of free trade between the EU25 and Russia using GTAP, a computable general equilibrium model. We review the sectoral effects by countries and make a tentative assessment of the impact on the regions in Northwest Russia. Free trade on its own would have a negative terms-of-trade effect in Russia and cause a small decline in welfare. If coupled with an increase in productivity, welfare would increase. This emphasises the importance of reforms in the Russian economy. The quantity of production in Russia in ferrous and non-ferrous metallurgy, machine building and metal working, and wood and paper are the principal declining sectors with free trade. Production in capital goods, fuel industry, and services increases. Thus there are some symptoms of Dutch disease. Due to its production structure the northwest would seem to benefit slightly less than Russia on average in terms of the volume of gross regional product. In this respect there are differences between the regions of northwest Russia.

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Bibliographic Info

Paper provided by The Research Institute of the Finnish Economy in its series Discussion Papers with number 1087.

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Length: 23 pages
Date of creation: 2007
Date of revision:
Handle: RePEc:rif:dpaper:1087

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Keywords: EU; Russia; free trade; integration;

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  1. Aghion, Philippe & Blundell, Richard William & Griffith, Rachel & Howitt, Peter & Prantl, Susanne, 2005. "The Effects of Entry on Incumbent Innovation and Productivity," CEPR Discussion Papers 5323, C.E.P.R. Discussion Papers.
  2. Sulamaa, Pekka & Widgrén, Mika, 2004. "EU Enlargement and Beyond: A Simulation Study on EU and Russia Integration," CEPR Discussion Papers 4720, C.E.P.R. Discussion Papers.
  3. Rutherford, Thomas & Tarr, David, 2006. "Regional impacts of Russia's accession to the World Trade Organization," Policy Research Working Paper Series 4015, The World Bank.
  4. Jasminka Sohinger, 2005. "Growth and Convergence in European Transition Economies : The Impact of Foreign Direct Investment," Eastern European Economics, M.E. Sharpe, Inc., vol. 43(2), pages 73-94, March.
  5. Kamal Saggi, 2002. "Trade, Foreign Direct Investment, and International Technology Transfer: A Survey," World Bank Research Observer, World Bank Group, vol. 17(2), pages 191-235, September.
  6. Risto Vaittinen, 2000. "Eastern Enlargement of the European Union - Transition in applicant countries and evaluation of the economic prospects with a dynamic CGE-model," Research Reports 64, Government Institute for Economic Research Finland (VATT).
  7. Peter Egger & Michael Pfaffermayr, . "A Note on Labor Productivity and Foreign Inward Direct Investment," WIFO Working Papers 109, WIFO.
  8. Jonathan E. Haskel & Sonia C. Pereira & Matthew J. Slaughter, 2007. "Does Inward Foreign Direct Investment Boost the Productivity of Domestic Firms?," The Review of Economics and Statistics, MIT Press, vol. 89(3), pages 482-496, August.
  9. Laura Alfaro & Areendam Chanda & Sebnem Kalemli-Ozcan & Selin Sayek, 2006. "How Does Foreign Direct Investment Promote Economic Growth? Exploring the Effects of Financial Markets on Linkages," NBER Working Papers 12522, National Bureau of Economic Research, Inc.
  10. Philippe Aghion & Richard Blundell & Rachel Griffith & Peter Howitt & Susanne Prantl, 2004. "Entry and Productivity Growth: Evidence from Microlevel Panel Data," Journal of the European Economic Association, MIT Press, vol. 2(2-3), pages 265-276, 04/05.
  11. Oleh Havrylyshyn & Ron van Rooden, 2003. "Institutions Matter in Transition, But So Do Policies," Comparative Economic Studies, Palgrave Macmillan, vol. 45(1), pages 2-24, March.
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  13. Pekka Sulamaa & Mika Widgrén, 2005. "Economic Effects of Free Trade between the EU and Russia," Economics Working Papers 036, European Network of Economic Policy Research Institutes.
  14. Görg, Holger & Greenaway, David, 2002. "Much Ado About Nothing? Do Domestic Firms Really Benefit from Foreign Investment?," CEPR Discussion Papers 3485, C.E.P.R. Discussion Papers.
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Cited by:
  1. Paavo Suni, 2008. "Effects of Energy Price Changes on Russian Economy," CESifo Forum, Ifo Institute for Economic Research at the University of Munich, vol. 9(2), pages 9-15, 07.
  2. Suni, Paavo, 2007. "Oil Prices and the Russian Economy. Some Simulation Studies with NiGEM," Discussion Papers 1088, The Research Institute of the Finnish Economy.
  3. Janne Niemi & Juha Honkatukia & Ville Kaitila & Markku Kotilainen, 2012. "Global trade and climate policy scenarios ? Impact on Finland," Working Papers 37, Government Institute for Economic Research Finland (VATT).

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