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How Do Trade in Intermediates and Geographical Forces Interact in Determining the Localisation of Industries in Central Eastern European Countries?

Author

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  • Gianfranco De Simone

    (University of Milan and Centro Studi Luca D'Agliano)

Abstract

Growing inflows of FDI and the increasing integration Central Eastern European Countries’ firms in International Production Networks set by EU-15 principals have brought to a rise in trade in parts and components. As a consequence, new patterns of localisation of industrial activities in CEECs have been observed. I put forward a general equilibrium model of trade and production which tries to explain cross-country variations of sectoral output on the basis of home market effect, trade in middle products, comparative advantages and market potential. Results coming from the empirical estimation allow me to draw some considerations about the driving forces behind the localisation over the second half of the 1990s of the four sectors in which most of the CEECs’ trade in intermediates with EU-15 is concentrated. I also argue that the proposed framework can be employed to test for the effectiveness of alternative trade theories.

Suggested Citation

  • Gianfranco De Simone, 2005. "How Do Trade in Intermediates and Geographical Forces Interact in Determining the Localisation of Industries in Central Eastern European Countries?," Development Working Papers 203, Centro Studi Luca d'Agliano, University of Milano.
  • Handle: RePEc:csl:devewp:203
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    File URL: http://www.dagliano.unimi.it/media/WP2005_203.pdf
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    More about this item

    Keywords

    Trade in Parts and Components; International Production Networks; Market Potential; Industry Localisation; Home Market Effect;

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration

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