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What determines sectoral trade in the enlarged EU?

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posted on 2005-07-14, 16:24 authored by Helena Marques, Hugh Metcalf
In this paper we estimate a sectoral gravity model for trade within a heterogeneous trade bloc, the enlarged EU, comprised of a high-income group (wealthiest EU), a middle-income group (Greece, Portugal and Spain), and a low-income group (acceding Central and Eastern European countries). The estimation was conducted on sectors with different degrees of scale economies and skill-intensities in the presence of transport costs. The results offer support for the call to incorporate trade theories based on both endowments and scale economies. In addition, whilst integrating poorer countries is beneficial for all of the participants in the bloc, there is still a role for redistribution policy. However, the EU’s Regional Policy, for example, should not be individual initiatives but should be a mix of policies, focussing on both income and education/skills, together with infrastructure development.

History

School

  • Business and Economics

Department

  • Economics

Pages

231191 bytes

Publication date

2003-09

Notes

Economics Research Paper, no. 03-08

Language

  • en

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