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EU-expansion effects on the SEE export to EU – Possible trade diversion

Gashi, Lumnie LU (2010) NEKM01 20091
Department of Economics
Abstract
The future of EU lies in the SEE or to rephrase, the future of the SEE lies in the EU. This is considered to be the case as the SEE countries that are not yet EU-members have been promised future membership and are therefore considered the next potential EU members. As this scenario lies in the future of an EU expansion an interest of what lies in the past of these two regions rises. This interest increases with consideration of existing research putting forth empirical evidence that suggest the EU expansion causes trade to divert away from non-members. In addition to this, a decrease of the SEE export to EU has been suggested to exist. In this paper I therefore ask if the EU expansion has affected this SEE export to EU in any way. This... (More)
The future of EU lies in the SEE or to rephrase, the future of the SEE lies in the EU. This is considered to be the case as the SEE countries that are not yet EU-members have been promised future membership and are therefore considered the next potential EU members. As this scenario lies in the future of an EU expansion an interest of what lies in the past of these two regions rises. This interest increases with consideration of existing research putting forth empirical evidence that suggest the EU expansion causes trade to divert away from non-members. In addition to this, a decrease of the SEE export to EU has been suggested to exist. In this paper I therefore ask if the EU expansion has affected this SEE export to EU in any way. This information is not important just in itself but also because of the long EU membership process, which differs with years between the SEE countries due to their different development stages. Different EU accession dates may cause further trade diversion for individual SEE countries as the EU expands further.

To be able to answer the question in this paper an empirical research is performed with the frequently used gravity model. The gravity equation is estimated through the OLS procedure. In aim of receiving the best regression results from the OLS an alternative version of the standard gravity equation, a fixed effect equation, is calculated and run as well. The quantitative study is performed on panel data from 1995 to 2008. By analyzing the export flows from 8 SEE countries to the 27 EU members a search for possible trade diversion effects reflecting the SEE export to EU is pursued.

Based on the analysis pursued an indication of trade diversion could be found and concluded to exist despite lack of significance of many estimates. The trade diversion reflects an export decrease from SEE to EU as an effect of every expansion year of the union. This indicates that further EU expansion may very well cause further export diversion from individual SEE countries to EU. However since the results are not completely clear cut, there is still room for further research as it may bring further support for these findings or further counter argument to these results. (Less)
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author
Gashi, Lumnie LU
supervisor
organization
course
NEKM01 20091
year
type
H1 - Master's Degree (One Year)
subject
keywords
EU enlargement, Gravity model, SEE export, trade diversion
language
English
id
1670082
date added to LUP
2010-09-22 15:09:13
date last changed
2010-09-22 15:09:13
@misc{1670082,
  abstract     = {The future of EU lies in the SEE or to rephrase, the future of the SEE lies in the EU. This is considered to be the case as the SEE countries that are not yet EU-members have been promised future membership and are therefore considered the next potential EU members. As this scenario lies in the future of an EU expansion an interest of what lies in the past of these two regions rises. This interest increases with consideration of existing research putting forth empirical evidence that suggest the EU expansion causes trade to divert away from non-members. In addition to this, a decrease of the SEE export to EU has been suggested to exist. In this paper I therefore ask if the EU expansion has affected this SEE export to EU in any way. This information is not important just in itself but also because of the long EU membership process, which differs with years between the SEE countries due to their different development stages. Different EU accession dates may cause further trade diversion for individual SEE countries as the EU expands further. 

To be able to answer the question in this paper an empirical research is performed with the frequently used gravity model. The gravity equation is estimated through the OLS procedure. In aim of receiving the best regression results from the OLS an alternative version of the standard gravity equation, a fixed effect equation, is calculated and run as well. The quantitative study is performed on panel data from 1995 to 2008. By analyzing the export flows from 8 SEE countries to the 27 EU members a search for possible trade diversion effects reflecting the SEE export to EU is pursued. 

Based on the analysis pursued an indication of trade diversion could be found and concluded to exist despite lack of significance of many estimates. The trade diversion reflects an export decrease from SEE to EU as an effect of every expansion year of the union. This indicates that further EU expansion may very well cause further export diversion from individual SEE countries to EU. However since the results are not completely clear cut, there is still room for further research as it may bring further support for these findings or further counter argument to these results.},
  author       = {Gashi, Lumnie},
  keyword      = {EU enlargement,Gravity model,SEE export,trade diversion},
  language     = {eng},
  note         = {Student Paper},
  title        = {EU-expansion effects on the SEE export to EU – Possible trade diversion},
  year         = {2010},
}