Trade in the enlarged European Union: a new approach on trade potential

This paper focuses on the trade potential of manufactured exports from countries belonging to the enlarged EU (EU25) to groups of countries of that economic area in 2002. We note that previous results on trade potential, based on the estimation of a gravity model, may be invalid. Thus, we propose a correct approach based on the Poisson Pseudo-Maximum Likelihood estimator and the calculation of confidence intervals with the Delta method. The gravity model includes fixed effects to capture bilateral trade specificities between country groupings. We conclude that CEEC as a group had apparently exhausted the possibilities for export expansion in the EU25, unless dynamic changes were to take place. However, several of the remaining EU25 countries had not yet reached their export potential to the EU25 markets, including to the CEEC as a group.     

The long-run decline in the share of agricultural and food products in international trade: a gravity equation approach to its causes

The objective of this study is to determine the causes of the loss of share of agricultural products and food in international trade. The article compares, using a gravity model, the impact of various factors upon bilateral trade in agricultural products, in manufactures and in total trade, between 1963 and 2000 for a representative sample of 40 countries. The results clearly demonstrate how the low demand elasticity for agricultural products and food, the high degree of protectionism to which they were subjected and their meagre share in intra-industrial trade are the principal causes of their relatively slow growth.     

Public and Private Education in an Integrated Europe: Studying to Migrate and Teaching to Stay?

This paper investigates public and private choices between internationally applicable and country‐specific education when graduates are mobile. Human capital depends on innate skills and study effort with either type of education. It is shown that national governments provide too few students with internationally applicable education, and too many with country‐specific education. This effect is mitigated, but not entirely eliminated, by the introduction of a graduate tax, according to which graduates are required to pay part of their taxes to the country where they received their education, regardless of residence. However, private educational choices are socially optimal with suitably differentiated tuition fees.     

The high road and the low road to international competitiveness: Extending the neo‐Schumpeterian trade model beyond technology

Extending the neo‐Schumpeterian trade model, we estimate a ‘social‐gap’ model for a group of 17 OECD countries over the period 1975–1995. We find that government spending on social protection, employment protection regulations, union density, strike activity, and income security in the labor market (all measured in ‘gap’ form) are statistically significantly related to changes in international competitiveness. Specifically, we find some support for a Calmfors–Driffil, nonlinear, relation between cooperative labor relations and social spending patterns on the one hand, and international trade (and inward foreign investment) competitiveness on the other, implying that countries with relatively stronger institutional arrangements have better international economic performance than countries in the middle of the scale of conflict and cooperation. Our results indicate that models focusing solely on innovative effort are misspecified, and may suffer from an omitted variable bias caused by the absence of consideration of other institutional factors influencing international trade and investment.