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Comparative Advantages, Transaction Costs and Factor Content of Agricultural Trade: Empirical Evidence from the CEE

  • Pavel Ciaian
  • d'Artis Kancs
  • Jan Pokrivcak

The present study examines factor content of the CEE transition country agricultural trade. We examine the relative country abundance for labour, capital and land, and test the Heckscher-Ohlin-Vanek (HOV) hypothesis. Our empirical findings suggest that the factor content of agricultural exports and imports is rather similar in CEE and most of the agricultural trade flows do not satisfy the HOV prediction. In order to explain the general lack of agricultural specialisation and the observed paradox in the CEE's agricultural trade, we examine the role of transaction costs and market imperfections. We find that transaction costs and market imperfections distort farm specialisation and hence factor content of agricultural trade.

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Paper provided by Economics and Econometrics Research Institute (EERI), Brussels in its series EERI Research Paper Series with number EERI_RP_2008_03.

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Length: 34 pages
Date of creation: Feb 2008
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Handle: RePEc:eei:rpaper:eeri_rp_2008_03
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