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Trade Potential In An Enlarged European Union: A Recent Approach

  • Enrique Martínez-Galán

    (ISEG-UTL & Portuguese Ministry for Finance)

  • Maria-Paula Fontoura

    (ISEG-UTL)

  • Isabel Proença

    (ISEG- UTL & CEMAPRE)

This paper aims to evaluate the trade potential of manufactured products between the members of the EU25 in the threshold of its Eastern enlargement. We estimate, for 2002, a cross-section gravity model, whose coefficients will be used to project the “natural” trade relations between them. Relatively to previous evaluations of trade potential, we include in the gravity model a variable related to the countries’ complementarities in terms of their Commodity Composition of Trade and we opt for a Poisson Pseudo-Maximum Likelihood Estimator. The latter is confronted with the OLS estimator normally used in this type of models.

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Paper provided by EconWPA in its series International Trade with number 0508011.

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Length: 31 pages
Date of creation: 31 Aug 2005
Date of revision:
Handle: RePEc:wpa:wuwpit:0508011
Note: Type of Document - pdf; pages: 31
Contact details of provider: Web page: http://econwpa.repec.org

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  17. Inmaculada Martínez-Zarzoso & Felicitas Nowak-Lehmann D., 2003. "Augmented gravity model: An empirical application to Mercosur- European trade flows," International Trade 0309019, EconWPA.
  18. J. M. C. Santos Silva & Silvana Tenreyro, 2003. "Gravity-defying trade," Working Papers 03-1, Federal Reserve Bank of Boston.
  19. K. Smarzynska, Beata, 2001. "Does Relative Location Matter for Bilateral Trade Flows? An Extension of the Gravity Model," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 16, pages 379-398.
  20. Boisso, Dale & Ferrantino, Michael, 1997. "Economic Distance, Cultural Distance, and Openness in International Trade : Empirical Puzzles," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 12, pages 456-484.
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  27. Limao, Nuno & Venables, Anthony J., 1999. "Infrastructure, geographical disadvantage, and transport costs," Policy Research Working Paper Series 2257, The World Bank.
  28. Cees van Beers & Guido Biessen, 1996. "Trade Possibilities and Structure of Foreign Trade: The Case of Hungary and Poland," Comparative Economic Studies, Palgrave Macmillan, vol. 38(2-3), pages 1-19, September.
  29. Dieter Schumacher, 2001. "Market Size and Factor Endowment: Explaining Comparative Advantage in Bilateral Trade by Differences in Income and Per Capita Income," Discussion Papers of DIW Berlin 259, DIW Berlin, German Institute for Economic Research.
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