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Price versus quality competition in Italys trade with central and eastern Europe aver the transition

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  • Anna Maria Ferragina

Abstract

This paper is an investigation on the main changes observed in the Italian trade with a group of Eastern European economies over the period 1988-1997, during which Italy has become the second EU trade partner for Eastern Europe after Germany. Eastern European countries show patterns of specialisation very similar to the Italian ones, in as much as they are based on "traditional" sectors, with an high intensity of labour and physical capital. Moreover, the evolution of comparative advantages suggest that a tendency exist: towards an increasing specialisation of the CEECs in labour intensive productions. There are signals of a possible conflict with the typical Italian pattern of export. An econometric test of the relationship between Italy-CEE comparative advantages and industry factor intesities using a simple of 3-digit NACE industries confirms the presence of a structural shift in favour of labour-intensitive productions, besides the persistence of the old specialisation of transition economies in capital.intensive industries. When intra-industry trade is considered, it appears that vertical product differentiation explains a relevant share of two-way trade. All the results seem to concur to the conclusion that no serious displacement should come to the Italian export from Eastern Europe competition. However, an econometric test of the employment effects associated with trade of different quality with the CEECs confirms the importance of monitoring the future evolution of vertical and horizontal intra-industry trade.

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Bibliographic Info

Paper provided by Department of Economics - University Roma Tre in its series Departmental Working Papers of Economics - University 'Roma Tre' with number 0015.

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Length: 61
Date of creation: Jun 2000
Date of revision:
Handle: RePEc:rtr:wpaper:0015

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Keywords: Neoclassical Models of Trade; Models of Trade with Imperfect Competition and Scale Economies; Country and industry studies of trade; Economic integration; Intra-industry trade;

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  1. Fontagné, Lionel & Freudenberg, Michael & Péridy, Nicolas, 1998. "Intra-Industry Trade and the Single Market: Quality Matters," CEPR Discussion Papers 1959, C.E.P.R. Discussion Papers.
  2. Mariano D'Antonio & Margherita Scarlato, 1997. "Struttura economica e commercio estero: un'analisi per le province italiane," Departmental Working Papers of Economics - University 'Roma Tre' 0001, Department of Economics - University Roma Tre.
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