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Central East European Countries’ accession into the European Union: role of extensive margin for trade in intermediate and final goods

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Abstract

We study the effect on trade in intermediates and final goods of the Central East European Countries’ (CEECs) accession into the European Union (EU) for the period 1999–2009. In doing so, we estimate a gravity model that incorporates the extensive margin of trade and accounts for firm heterogeneity. We capture the importance of production networks by including imports of intermediates as a determinant of a country’s exports of final goods. We find a positive and significant effect of the CEECs accession on EU trade in intermediate and final goods. Once the extensive margin of trade is accounted for, the effect of the CEECs accession into the EU is higher on trade in intermediate goods than on trade in final goods.

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Notes

  1. Imports enter with one lag to account for the fact that parts and components imported in period t-1 can be used to produce final goods in period t. We take the total value of imported parts in a given industry k for two reasons. First, parts could be used in the production of final goods in industry k independently of the country of origin, and second, endogeneity issues that could arise when using bilateral imports are avoided by aggregating imports by destination.

  2. We also estimate the model in its original multiplicative form and the main results remain unchanged.

  3. The list of countries and product categories are provided in the “Appendix” in Tables 5 and 6, respectively.

  4. CEPII stands for Centre d'Etudes Prospectives et d'Informations Internationales. It is a French leading institute for research on the international economy.

  5. The description of all variables is given in Table 7 in the “Appendix”.

  6. https://wits.worldbank.org/.

  7. Figures 1 and 2 in the “Appendix” show the evolution over time of the extensive margins of intermediate and final goods trade between the CEECs and the EU + CEEC countries.

  8. A Hausman test indicates that the dyadic unobservable effects are correlated with the error term, hence the random effects approach, ignoring this correlation, leads to inconsistent estimators. The problem can be handled by using the fixed effects approach, which essentially eliminates the dyadic unobservable effects.

  9. Results are available upon request.

  10. Results are available on request from the authors.

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Authors and Affiliations

  1. Department of Economics, Georg-August Universitaet Goettingen, Goettingen, Germany

    Inmaculada Martinez-Zarzoso

  2. University Jaume I, Castellón, Spain

    Inmaculada Martinez-Zarzoso

  3. Department of Economics, Rollins College, Winter Park, FL, 32789, USA

    Anca Monika Voicu & Martina Vidovic

Authors
  1. Inmaculada Martinez-Zarzoso
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  2. Anca Monika Voicu
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  3. Martina Vidovic
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Correspondence to Anca Monika Voicu.

Appendix

Appendix

See Tables 5, 6, 7 and Figs. 1 and 2.

Table 5 Economic organizations of countries in the dataset
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Table 6 List of parts and components according to the standard industrial classification (SITC) system revision 3
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Table 7 Definitions of variables
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Martinez-Zarzoso, I., Voicu, A.M. & Vidovic, M. Central East European Countries’ accession into the European Union: role of extensive margin for trade in intermediate and final goods. Empirica 42, 825–844 (2015). https://doi.org/10.1007/s10663-015-9279-1

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