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empirical study. Two sections each dedicated to a different region, describe, firstly, preferential trade liberalization (in the case of CEE countries focusing on the role of the EU Association Agreements and intra-CEE agreements in this process), and secondly, present and discuss the estimation results obtained for the whole CEE or MPC group as well as for separate countries in each region. Finally, the summary and conclusion for each section are presented. The Analytical Framework To study the impact of the free trade agreements on bilateral exports and imports of the CEE countries and given the perceived failure of intra-MPC trade agreements it is interesting to study whether MPCs do any better in the case of Euro-Mediterranean Association Agreements compared to their sub-regional and bilateral trade agreements. We use a gravity model of bilateral trade flows in its extended form that can be derived from neoclassical as well as new trade models that assume incomplete specialization in production. The gravity models have been widely used in empirical studies of economic integration processes to investigate the changes in the geographic trade pattern and the effects of FTAs and currency unions on trade flows. However, most previous studies are based on the gravity models in the simplified form that assumes complete specialization in production either at the country or the firm level and foresees no role for factor proportions. These simplistic models predict that trade between two countries depends only on their size and trade costs between them. In our view such models cannot be regarded as fully satisfactory as the estimates of the effects of FTAs obtained on the basis of such models may be seriously biased due to the lack of controls for factor proportions that play a key role in the determination of trade flows in the incomplete specialization models especially when they are estimated for the middle- or low-income countries. Therefore, in contrast to such models, the generalized estimating equation that encompasses particular estimating equations derived from various theoretical models used in our empirical study can be expressed in its logarithmic form as follows: 25
n lnTijt = ∑ k= 1 β RTAijt + α1lnYit + α2lnYjt + α3lnKit/Lit + α4lnKjt/Ljt + α5lnDISTANCEij + k α6CONTIGUITYij + α7LANGUAGEij + α8COLONYij + α9COLONIZERij + ui + uj + uij + vt + εijt. (1) where: Tijt is the value of trade flows (exports and imports, respectively) between countries i and j in year t; RTAijt is a dummy variable indicating whether countries i and j are both the members of a bilateral or a plurilateral regional preferential trading agreement in year t; Yit and Yjt are the levels of GDP in countries i and j in year t, respectively; Kit/Lit and Kjt/Ljt are the capital per worker stocks in countries i and j in year t, respectively; DISTANCEij is the distance between countries i and j; CONTIGUITYij is a dummy variable indicating whether countries i and j share a common border; LANGUAGEij is a dummy variables indicating whether at least 9% of the population in countries i and j speak a common language (for the MPCs two other dummy variables were used instead: ARABICij and TURKISHij are two dummy variables indicating whether countries i and j share a common language); COLONYij is a dummy variable indicating whether countries i and j were in a colonial relationship; COLONIZERij is a dummy variable indicating whether countries i and j shared a common colonizer (after 1945 the CEE countries being in the Soviet Union’s zone of influence); ui and uj are the individual fixed effects for countries i and j, respectively; uij is the country-pair specific effect; vt is the time specific effect, and εijt is the error term that satisfies the standard properties. The preferential trading agreements once implemented should increase bilateral trade of both trading partners in the case of reciprocity, hence βi > 0 for all effective agreements. All theoretical models predict that trade flows should increase with the economic size of both trading partners, hence α1, α2 > 0. However, the impact of the factor proportion variables cannot be a priori determined as it varies across various models of incomplete specialization in production and could be either positive, negative or none depending of the extent of product differentiation. Therefore, the signs of the estimated parameters on the factor proportion variables α3 , α4 and their statistical significance have to be determined empirically. 26
Page 1 and 2: In collaboration with: F E M I S E
Page 3 and 4: Table of contents INTRODUCTION AND
Page 5 and 6: Introduction and summary In the pro
Page 7 and 8: that of the NMS, we would observe a
Page 9 and 10: accession to the EU. Instead, a num
Page 11 and 12: trade area (FTA). The Agadir Agreem
Page 13 and 14: liberalization has taken five years
Page 15 and 16: signed Europe Agreements, EFTA and
Page 17 and 18: used as industry organization varia
Page 19 and 20: The main goal of the project was to
Page 21 and 22: Chapter 1: Assessing trade liberali
Page 23 and 24: Agricultural Policy (CAP). Further
Page 25: Agreements concluded with the MPCs.
Page 29 and 30: Preferential trade liberalization i
Page 31 and 32: the EU enlargement, the EFTA lost t
Page 33 and 34: The most important of these was the
Page 35 and 36: The Definitions of the Variables an
Page 37 and 38: Estimates for the whole CEE sample
Page 39 and 40: agreements is, however, mixed. Whil
Page 41 and 42: The OLS estimates suggest that both
Page 43 and 44: Czech Republic Estonia Hungary Lith
Page 45 and 46: Czech Slovak Republic Estonia Hunga
Page 47 and 48: products. The provisions of the Eur
Page 49 and 50: foreseen to take effect in 2005. Ho
Page 51 and 52: Similar to the AMU, the ACC was for
Page 53 and 54: Unfortunately, the data on capital
Page 55 and 56: Table 2. The estimates for bilatera
Page 57 and 58: obust, while the dummy variable for
Page 59 and 60: Yi (partner) 0.944 1.009 2.267 1.96
Page 65 and 66: Agreements on the third countries a
Page 67 and 68: Chapter 2: Grossman-Helpman Model I
Page 69 and 70: N function (U ), given by: + ( ) u
Page 71 and 72: ti 1+ ti xi Ii −α i mi = ⋅ ,
Page 73 and 74: Probably the most extensive list of
Page 75 and 76: eginning of 1990. But the tariff st
Page 77 and 78:
The non-preferential (MFN, conventi
Page 79 and 80:
have important impact on political
Page 81 and 82:
xi where ti is the tariff, ei is th
Page 83 and 84:
We can recover the structural param
Page 85 and 86:
Appendix Table 2 Estimation results
Page 87 and 88:
Table 4 Estimation results using mo
Page 89 and 90:
Testing Grossman-Helpman model for
Page 91 and 92:
practice most importers do not pay
Page 93 and 94:
countries were traditionally subjec
Page 95 and 96:
point to notify the US government o
Page 97 and 98:
and between 157% and 247% in 2004.
Page 99 and 100:
policy reforms. On the other hand i
Page 101 and 102:
Table 1 Estimation results for Isra
Page 103 and 104:
1995 0.00202 [2.04]** -0.00199 [2.0
Page 105 and 106:
extended to disaggregation of burea
Page 107 and 108:
The Importance of Corruption A subs
Page 109 and 110:
transition countries. Sekkat and Ve
Page 111 and 112:
society. In addition, they show tha
Page 113 and 114:
Johnson, Kaufmann, McMillan, and Wo
Page 115 and 116:
corruption. For example, upon grant
Page 117 and 118:
and criminal prosecution. On the ot
Page 119 and 120:
estimation are likely to be influen
Page 121 and 122:
levels have been used to derive fur
Page 123 and 124:
Union. In fact, the level of regula
Page 125 and 126:
Table 2 List of the Commonly Raised
Page 127 and 128:
Table 6 Predicted improvement (show
Page 129 and 130:
SB_PR all procedures required to re
Page 131 and 132:
AFGHANISTAN, ALBANIA, ALGERIA, ANGO
Page 133 and 134:
Brunetti, Aymo; Kisunko, Gregory an
Page 135 and 136:
Hines, J.R. (1995). Forbidden Payme
Page 137 and 138:
PellegriniI, Lorenzo and Gerlagh, R
Page 139:
World Bank (2005). Doing Business i
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