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Trade Specialisation and Economic Convergence: Evidence from two Eastern European Countries

  • Guglielmo Maria Caporale
  • Christophe Rault
  • Robert Sova
  • Anamaria Sova

This paper analyses trade specialisation dynamics in two Eastern European countries (Romania and Bulgaria – EEC-2) vis-à-vis the core EU member states (EU-15) over the period 1990-2006. Specifically, we focus on whether there is a shift towards intra-industry trade leading to economic convergence and technological catch-up. We use recently developed static (FEM, REM and FEVD) and dynamic (GMM) panel data methods which take into account possible heterogeneity. Our empirical results indicate that intra-industry trade has indeed increased, but it is of the vertical rather than the horizontal type, resulting in complementary rather than competitive production patterns.

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File URL: http://degit.sam.sdu.dk/papers/degit_16/c016_071.pdf
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Paper provided by DEGIT, Dynamics, Economic Growth, and International Trade in its series DEGIT Conference Papers with number c016_071.

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Length: 28 pages JEL Classification: F13, F15, C23
Date of creation: Sep 2011
Date of revision:
Handle: RePEc:deg:conpap:c016_071
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  1. Rodney Thom & Moore McDowell, 1999. "Measuring marginal intra-industry trade," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 135(1), pages 48-61, March.
  2. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
  3. Roy J. Ruffin, 1999. "The nature and significance of intra-industry trade," Economic and Financial Policy Review, Federal Reserve Bank of Dallas, issue Q IV, pages 2-9.
  4. Caporale, Guglielmo Maria & Rault, Christophe & Sova, Anamaria & Sova, Robert, 2008. "On the Bilateral Trade Effects of Free Trade Agreements between the EU-15 and the CEEC-4 Countries," IZA Discussion Papers 3782, Institute for the Study of Labor (IZA).
  5. Kaitila, Ville & WidgrÉn, Mika, 1999. "Revealed Comparative Advantage in Trade between the European Union and the Baltic States," Discussion Papers 697, The Research Institute of the Finnish Economy.
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  9. Christophe Rault & Robert Sova & Ana Maria Sova, 2009. "Modelling international trade flows between CEEC and OECD countries," Applied Economics Letters, Taylor & Francis Journals, vol. 16(15), pages 1547-1554.
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  12. Bergstrand, Jeffrey H, 1989. "The Generalized Gravity Equation, Monopolistic Competition, and the Factor-Proportions Theory in International Trade," The Review of Economics and Statistics, MIT Press, vol. 71(1), pages 143-53, February.
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  14. Eleonora Cavallaro & Marcella Mulino, 2008. "Vertical Innovation and Catching-Up: Implications of EU Integration for CEECs-5," International Advances in Economic Research, International Atlantic Economic Society, vol. 14(3), pages 265-279, August.
  15. Lionel Fontagné & Michaël Freudenberg, 1997. "Intra-Industry Trade: Methodological Issues Reconsidered," Working Papers 1997-01, CEPII research center.
  16. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 277-97, April.
  17. Kaitila, Ville, 1999. "Trade and Revealed Comparative Advantage: Hungary, the Czech Republic, and the European Union," BOFIT Discussion Papers 8/1999, Bank of Finland, Institute for Economies in Transition.
  18. Peter Egger & Michael Pfaffermayr, 2003. "The proper panel econometric specification of the gravity equation: A three-way model with bilateral interaction effects," Empirical Economics, Springer, vol. 28(3), pages 571-580, July.
  19. Céline CARRERE, 2003. "Revisiting the Effects of Regional Trading Agreements on trade flows with Proper Specification of the Gravity Model," Working Papers 200310, CERDI.
  20. Helpman, Elhanan, 1987. "Imperfect competition and international trade: Evidence from fourteen industrial countries," Journal of the Japanese and International Economies, Elsevier, vol. 1(1), pages 62-81, March.
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  22. José Manuel Martins Caetano & Aurora Galego, 2006. "In Search for Determinants of Intra-Industry Trade within an Enlarged Europe," Economics Working Papers 2_2006, University of Évora, Department of Economics (Portugal).
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