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New Borders and Trade Flows: A Gravity Model Analysis of the Baltic States

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  • Darren Byers
  • Talan Işcan

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  • Barry Lesser

Abstract

The objective of this paper is to provide evidence on the effects of an economic and political union by studying the trade flows of the three Baltic countries of Estonia, Latvia and Lithuania after the breakup of the Soviet Union. We specify and estimate a gravity model of exports for the Nordic countries which enables us to determine the size and direction of trade flows in the Baltic states had they not been affected by the political institutions of the Soviet Union. Our results suggest that Baltic foreign trade was not only reduced significantly but also diverted to the members of the former Soviet Union. Consistent with our estimates, we also find that these consequences of the former political union are quickly dissipating, and the Baltic countries are increasing their share of exports to the European Union and the U.S. Copyright Kluwer Academic Publishers 2000

Suggested Citation

  • Darren Byers & Talan Işcan & Barry Lesser, 2000. "New Borders and Trade Flows: A Gravity Model Analysis of the Baltic States," Open Economies Review, Springer, vol. 11(1), pages 73-91, January.
  • Handle: RePEc:kap:openec:v:11:y:2000:i:1:p:73-91
    DOI: 10.1023/A:1008305213791
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    References listed on IDEAS

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    1. Jeffrey A. Frankel, 1997. "Regional Trading Blocs in the World Economic System," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 72.
    2. Alan Deardorff, 1998. "Determinants of Bilateral Trade: Does Gravity Work in a Neoclassical World?," NBER Chapters,in: The Regionalization of the World Economy, pages 7-32 National Bureau of Economic Research, Inc.
    3. Deardorff, Alan V., 1984. "Testing trade theories and predicting trade flows," Handbook of International Economics,in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 1, chapter 10, pages 467-517 Elsevier.
    4. McCallum, John, 1995. "National Borders Matter: Canada-U.S. Regional Trade Patterns," American Economic Review, American Economic Association, vol. 85(3), pages 615-623, June.
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    Citations

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    Cited by:

    1. Boris A. Portnov, 2005. "Development similarity based on proximity - a case study of urban clusters in Canada," ERSA conference papers ersa05p137, European Regional Science Association.
    2. Helga Kristjánsdóttir, 2005. "A Gravity Model for Exports from Iceland," CAM Working Papers 2005-14, University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics.
    3. A. Porojan, 2001. "Trade Flows and Spatial Effects: The Gravity Model Revisited," Open Economies Review, Springer, vol. 12(3), pages 265-280, July.
    4. Laaser, Claus-Friedrich & Schrader, Klaus, 2003. "Neue Partner in Europa: der baltische Außenhandel im Umbruch," Open Access Publications from Kiel Institute for the World Economy 3128, Kiel Institute for the World Economy (IfW).
    5. Kiyong Keum, 2010. "Tourism flows and trade theory: a panel data analysis with the gravity model," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 44(3), pages 541-557, June.
    6. Katrin Elborgh-Woytek, 2003. "Of Openess and Distance; Trade Developments in the Commonwealth of Independent States, 1993-2002," IMF Working Papers 03/207, International Monetary Fund.

    More about this item

    Keywords

    trade flows; gravity model; Baltic countries;

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration
    • P20 - Economic Systems - - Socialist Systems and Transition Economies - - - General

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