Factors of trade in Europe |
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| Institution: | 1. CERGE-EI, Charles University and The Czech Academy of Sciences, Politickych veznu 7, 11121 Prague, Czech Republic;2. The William Davidson Institute at the University of Michigan Business School, United States;3. Center for Organizational Dynamics, University of Pennsylvania, United States;4. CEPR, London, United Kingdom;5. CESifo, Munich, Germany;6. IOS, Regensburg, Germany;7. The Euro Area Business Cycle Network, Germany;1. Institute of Biological, Environmental and Rural Sciences, Aberystwyth University, Penglais, Aberystwyth SY23 3FG, UK;2. NERC Centre for Ecology and Hydrology, Wallingford OX10 8BB, UK;1. Eastern Mediterranean University, Cyprus;2. Southern Illinois University Edwardsville, United States;1. Financial Stability Department of the Czech National Bank, Czech Republic;2. External Economic Relations Division of the Czech National Bank, Czech Republic;1. Department of Economics and Finance, Brunel University, Uxbridge UB8 3PH, United Kingdom;2. CERDI, University of Auvergne, France;3. Institute of Economic Studies, Charles University, Czech Republic;4. CESifo Munich, Germany |
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| Abstract: | We analyze how a set of determinants affect trade among European countries over the period 1992–2008. The factors encompass variables from the areas of geography, culture, institutions, infrastructure, and trade direction. Trade is analyzed for four types of goods: primary goods, parts and components, capital goods, and consumer goods. For each type of good we also distinguish its definition in terms of flows, intensive margin, and extensive margin. Methodologically, we first derive country-pair fixed effects over all possible pairs of export–import partners, and in the second stage we relate fixed effects with a set of influential factors. We show (i) the intuitive and varying effects of geographical, cultural, and institutional factors; (ii) the beneficial effects of soft and hard infrastructure; and (iii) the key importance of trade between old and new EU members. |
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| Keywords: | Bilateral trade Factors of trade Panel data European Union |
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