The structure and evolution of trade in Central and Eastern Europe in the 1990s

Abstract

This article analyses trade between some of the most advanced Central and Eastern European countries, using Spain as a benchmark, in order to find the determinants and characteristics of the trade patterns that have emerged in the 1990s. The empirical study includes the calculation of different indexes, namely Balassa's index of comparative advantage and the adjusted Grubel – Lloyd index. The analysis assesses whether these trade patterns can be explained by specialisation according to comparative advantage or by intra-industry trade. While trade theory often treats both as alternatives, I find that for the case of these countries they can complement each other.

Notes

¹There are big differences among the different CEEC now and also there were significant disparities at the start of their transition process in the early 1990s. For further information on this see for example García-Loro and Palazuelos-Martinez (2002), Henderson (2005), Johnson (2005), Luengo (1999) and Luengo and Flores (2001).

²UNCTAD database ‘Handbook of Statistics’, available at: http://www.unctad.org/statistics/handbook, accessed December 2005.

³This could be either according to the Cournot or the Bertrand model. For an analysis using the Cournot model, see Venables (1984).

⁴Other interesting articles that discuss more generally the role of FDI in the countries included in our study (in Eastern Europe, the EU and/or Spain) are Baniak et al. (2005), Hunya (2000, 2002), Mickiewicz et al. (2001, 2003) and Martín and Turrion (2003).

⁵Moreover, a similar relation between distance and export performance has been shown empirically (Redding & Venables 2004).

⁶More detailed results of these calculations for each country are shown in the Appendix.

Additional information

Notes on contributors

Manuel Palazuelos-Martinez

I would like to thank the participants of seminars and conferences at Columbia University and the LSE, Henry Overman, Waltraud Schelkle and especially Fernando Luengo for very helpful comments to this paper. The usual disclaimer applies.