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Factor Endowment and Market Size in EU-CEE Trade : Would Human Capital Change Actual Quality Trade Patterns?

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  • ANNA MARIA A FERRAGINA
  • FRANCESCO PASTORE

Abstract

This paper aims to test several hypotheses on determinants of the quality of trade in cross-country regressions, taking a sample of trade competitors in EU markets. The hypotheses are those underlying two models of vertical intra-industry trade: the so-called neo-Heckscher-Ohlin model, and an economic geography model based on market size and economic integration. The explanatory variables significantly affect the dependent variable, and we conclude that these variables give rise to specialization in different segments of the quality spectrum. Information is drawn from the analysis with respect to Central and Eastern European (CEE) specialization in low-quality exports to EU markets. In particular, the estimates suggest the existence of a process of the "crowding out" of existing human capital due to the process of economic transition. Moreover, the smaller market size of the EU-accession countries could contribute to strengthening the CEE disadvantage in high-quality segments of production.

Suggested Citation

  • Anna Maria A Ferragina & Francesco Pastore, 2005. "Factor Endowment and Market Size in EU-CEE Trade : Would Human Capital Change Actual Quality Trade Patterns?," Eastern European Economics, Taylor & Francis Journals, vol. 43(1), pages 5-33, January.
    • Handle: RePEc:mes:eaeuec:v:43:y:2005:i:1:p:5-33
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    Cited by:

    1. Anna Maria Ferragina & Francesco Pastore, 2008. "Mind The Gap: Unemployment In The New Eu Regions," Journal of Economic Surveys, Wiley Blackwell, vol. 22(1), pages 73-113, February.
    2. Andersson, Martin & Johansson, Sara, 2010. "Human capital and the structure of regional export flows," Technology in Society, Elsevier, vol. 32(3), pages 230-240.
    3. Pastore, Francesco, 2005. "To Study or to Work? Education and Labour Market Participation of Young People in Poland," IZA Discussion Papers 1793, Institute of Labor Economics (IZA).
    4. BOJNEC, Stefan & FERTO, Imre, 2009. "Determinants of agro-food trade competition of Central European countries with the European Union," China Economic Review, Elsevier, vol. 20(2), pages 327-337, June.
    5. Károly Attila SOÓS, 2013. "The Role of Intra-Industry Trade in the Industrial Upgrading of the 10 CEECs New Members of the European Union," KIER Working Papers 868, Kyoto University, Institute of Economic Research.

    More about this item

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • P23 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Factor and Product Markets; Industry Studies; Population

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