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Trade and Migration: a U-Shaped Transition in Eastern Europe

  • Adolfo Cristobal-Campoamor

    ()

    (International School of Economics at Tbilisi State University )

This paper proposes a 2-country 3-region economic geography model that can account for the most salient stylized facts experienced by Eastern European transition economies during the 1990s. In contrast to the existing literature, which has favored technological explanations, trade liberalization and factor mobility are the only driving forces. The model correctly predicts that in the first half of the decade trade liberalization led to divergence in GDP per capita, both between the West and the East and within the East. Consistent with the data, in the second half of the decade, internal labor mobility in the East reversed this process, and convergence became the dominant force. The model furthermore shows that the same U-shaped pattern applies to relative industrialization of West and East, although within the East the hinterland continued to lose industry throughout the decade.

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File URL: http://www.iset.ge/files/010-08.pdf
File Function: First version, 2008
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Paper provided by International School of Economics at TSU, Tbilisi, Republic of Georgia in its series Working Papers with number 010-08.

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Length: 32 pages
Date of creation: Aug 2008
Date of revision:
Handle: RePEc:tbs:wpaper:08-010
Contact details of provider: Web page: http://www.iset.ge/

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  1. Krugman, Paul & Venables, Anthony J, 1994. "Globalization and the Inequality of Nations," CEPR Discussion Papers 1015, C.E.P.R. Discussion Papers.
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  9. Ross, Matthias, 2001. "Transfers, agglomeration and German unification," HWWA Discussion Papers 144, Hamburg Institute of International Economics (HWWA).
  10. Forslid, Rikard, 2003. "Regional Policy, Integration and the Location of Industry," Research Papers in Economics 2003:7, Stockholm University, Department of Economics.
  11. Luca De Benedictis & Roberta De Santis & Claudio Vicarelli, 2005. "Hub-and-Spoke or else? Free trade agreements in the 'enlarged' European Union," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 2(2), pages 245-260, December.
  12. Blanchard, Olivier, 1996. "Theoretical Aspects of Transition," American Economic Review, American Economic Association, vol. 86(2), pages 117-22, May.
  13. Krugman, Paul & Elizondo, Raul Livas, 1996. "Trade policy and the Third World metropolis," Journal of Development Economics, Elsevier, vol. 49(1), pages 137-150, April.
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