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Trade, product variety and welfare: A quantitative assessment for the transition economies in Central and Eastern Europe

  • Funke, Michael

    ()

    (BOFIT)

  • Ruhwedel, Ralf

    ()

    (BOFIT)

We calculate welfare gains of trade liberalization in the Central and East European transition economies, following the approach of Romer (1994), who emphasized that proper modeling of the impact of trade restrictions on the number of available product varieties is crucial to quantifying the welfare impact of trade liberalization. The empirical work relies on direct measures of product variety calculated from 5-digit trade data. Although the issue is far from settled, the emerging conclusion is that freer trade has boosted welfare.

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File URL: http://www.suomenpankki.fi/bofit_en/tutkimus/tutkimusjulkaisut/dp/Documents/dp1703.pdf
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Paper provided by Bank of Finland, Institute for Economies in Transition in its series BOFIT Discussion Papers with number 17/2003.

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Length: 24 pages
Date of creation: 29 Dec 2003
Date of revision:
Handle: RePEc:hhs:bofitp:2003_017
Contact details of provider: Postal: Bank of Finland, BOFIT, P.O. Box 160, FI-00101 Helsinki, Finland
Phone: + 358 10 831 2268
Fax: + 358 10 831 2294
Web page: http://www.suomenpankki.fi/bofit_en/
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  1. Michael Funke & Ralf Ruhwedel, 2005. "Export variety and economic growth in East European transition economies," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 13(1), pages 25-50, 01.
  2. Robert Feenstra, 2004. "Estimating The Effects Of Trade Policy," Working Papers 9510, University of California, Davis, Department of Economics.
  3. Tito Boeri & Joaquim Oliveira Martins, 2000. "Varieties, Jobs and EU Enlargement," William Davidson Institute Working Papers Series 301, William Davidson Institute at the University of Michigan.
  4. Feenstra, Robert C, 1994. "New Product Varieties and the Measurement of International Prices," American Economic Review, American Economic Association, vol. 84(1), pages 157-77, March.
  5. David H. Romer & Jeffrey A. Frankel, 1999. "Does Trade Cause Growth?," American Economic Review, American Economic Association, vol. 89(3), pages 379-399, June.
  6. David Hummels & Peter J. Klenow, 2002. "The Variety and Quality of a Nation's Trade," NBER Working Papers 8712, National Bureau of Economic Research, Inc.
  7. Michael Funke & Ralf Ruhwedel, 1999. "Product Variety and Economic Growth-Empirical Evidence for the OECD Countries," CRIEFF Discussion Papers 9906, Centre for Research into Industry, Enterprise, Finance and the Firm.
  8. Feenstra, Robert C. & Madani, Dorsati & Yang, Tzu-Han & Liang, Chi-Yuan, 1999. "Testing endogenous growth in South Korea and Taiwan," Journal of Development Economics, Elsevier, vol. 60(2), pages 317-341, December.
  9. Feenstra, Robert C. & Yang, Tzu-Han & Hamilton, Gary G., 1999. "Business groups and product variety in trade: evidence from South Korea, Taiwan and Japan," Journal of International Economics, Elsevier, vol. 48(1), pages 71-100, June.
  10. Rodrik, Dani, 1992. "Foreign Trade in Eastern Europe's Transition: Early Results," CEPR Discussion Papers 676, C.E.P.R. Discussion Papers.
  11. Jeffrey D. Sachs & Andrew Warner, 1995. "Economic Reform and the Process of Global Integration," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(1, 25th A), pages 1-118.
  12. Robert C. Feenstra, 1992. "How Costly Is Protectionism?," Journal of Economic Perspectives, American Economic Association, vol. 6(3), pages 159-178, Summer.
  13. Robert Feenstra, 2003. "Integration Of Trade And Disintegration Of Production In The Global Economy," Working Papers 986, University of California, Davis, Department of Economics.
  14. Paul M. Romer, 1993. "New Goods, Old Theory, and the Welfare Costs of Trade Restrictions," NBER Working Papers 4452, National Bureau of Economic Research, Inc.
  15. Drábek, Zdenek & Smith, Alasdair, 1995. "Trade Performance and Trade Policy in Central and Eastern Europe," CEPR Discussion Papers 1182, C.E.P.R. Discussion Papers.
  16. Rutherford, Thomas F. & Tarr, David G., 1998. "Trade liberalization and endogenous growth in a small open economy : a quantitative assessment," Policy Research Working Paper Series 1970, The World Bank.
  17. Richard Harris, 1983. "Applied General Equilibrium Analysis of Small Open Economies with Scale Economies and Imperfect Competition," Working Papers 524, Queen's University, Department of Economics.
  18. Hoekman, Bernard & Djankov, Simeon, 1997. "Determinants of the Export Structure of Countries in Central and Eastern Europe," World Bank Economic Review, World Bank Group, vol. 11(3), pages 471-87, September.
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