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Integration, Institutions and Export Specialization

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Economic Crisis in Europe and the Balkans

Part of the book series: Contributions to Economics ((CE))

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Abstract

This paper studies the impact of economic integration and institutional reforms on export specialization in Central and Eastern Europe. The integration and transition process in Central and Eastern Europe offer us a good empirical setting to examine this research question. The empirical analysis is set up for ten Central and Eastern European countries (CEEC) over the period 1996–2008. We find robust results that better protected property rights and a fair credit policy lead to more diversified exports. Trade integration, on the other hand, stimulates export specialization, but institutions seem to be more important in explaining export patterns

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Notes

  1. 1.

    For a list of free-trade agreements see http://www.stabilitypact.org and http://www.wto.org and Damijan et al. (2009), Niebuhr and Schlitte (2009).

  2. 2.

    Bulgaria, Romania, Hungary, Estonia and Slovenia.

  3. 3.

    Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovak Republic and Slovenia.

  4. 4.

    Francois and Manchin (2007) investigate world data with a special focus for the relations South-South, North–south and North-Least developed countries.

  5. 5.

    Bulgaria, Czech Republic, Estonia, Hungary, Lithuania, Latvia, Poland, Romania, Slovakia and Slovenia.

  6. 6.

    We investigate here the degree of the so-called absolute specialization, i.e. the extent to what a given country or region is specialized in a limited number of activities. This concept of specialization directly relates to the concept of risk exposure. This contrasts with relative specialization which measures to what extent the export or production structure differs from those of the other (contingent) countries or regions.

  7. 7.

    The Eurostat comext trade statistics is a high quality database containing annual data on trade flows to and from European countries. The HS product level data were converted to the NACE 2-digit level using the concordance table from Eurostat (HS to NACE Rev. 1.1).

  8. 8.

    Tariffs and imports were collected on product level and converted to the NACE 2-digit level using the concordance table from Eurostat (HS to NACE Rev. 1.1).

  9. 9.

    Enterprise reform reflects a tight credit and subsidy policy, a good bankruptcy legislation and effective corporate control. Competition policy indicates that actions are taken to reduce abuse of market power. The financial institutions indicator reflects the emergence of investment funds, private insurance and pension funds and a regulatory framework.

  10. 10.

    CEEC are often used as export platforms because these countries are a cheaper location (a.o. labor costs, corporate tax) and have good market access to Western Europe (Sinn 2006; Ekholm et al. 2007; Bloningen et al. 2007)

  11. 11.

    Trade freedom reflects the openness of an economy to imports of goods and services and the ability of citizens to buy and sell at the international market.

  12. 12.

    Investment freedom means no restrictions on foreign investment.

  13. 13.

    Full price liberalization would mean that prices are left to the market and no price controls on housing or transport exist.

  14. 14.

    Trade liberalization means the removal of all quantitative and administrative import and export restrictions.

  15. 15.

    A well-functioning banking competition, effective supervision, liberalization of interest rates and credit allocation.

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Acknowledgments

We thank Hylke Vandenbussche, Joep Konings, André Sapir, Christophe Croux, Carlo Altomonte and Julia Wörz for providing useful feedback. We also thank participants of LICOS and UCL seminars, ETSG and Midwest Trade Meetings for comments and the Research Council of the KULeuven for funding this research.

Author information

Authors and Affiliations

  1. KU Leuven|Thomas More Antwerp, Korte Nieuwstraat 33, 2000, Antwerp, Belgium

    Karen Crabbé

  2. University of Luxembourg, 162a av. de la Faiencerie, L-1511, Luxembourg, Luxembourg

    Michel Beine

Authors
  1. Karen Crabbé
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Corresponding author

Correspondence to Karen Crabbé .

Editor information

Editors and Affiliations

  1. School of Business and Economy, Accountancy Department, Kavala Institute of Technology, Agios Loukas, Kavala, 65404, Greece

    Anastasios Karasavvoglou

  2. School of Business and Economy, Accountancy Department, Kavala Institute of Technology, Agios Loukas, Kavala, 65404, Greece

    Persefoni Polychronidou

Appendix

Appendix

Data description:

  • Export specialization: Herfindahl index is the sum of all export shares over all industries within one country, source: Eurostat Comext trade database

  • Weighted tariff: historical applied tariffs, source: WTO, UN comtrade database

  • Business cycle: detrended GDP data with Hodrick-Prescott filter, source: Eurostat

  • Labor cost index: is a Euro indicator which measures the cost of the production factor labor with base year =2000, source: Eurostat

  • Government size: The burden of excessive government on a scale from 0 to 100, source: The Heritage Foundation

  • Property rights: The ability to accumulate private property from 0 to 100, source: The Heritage Foundation

  • FDI: Value of foreign direct investment stock, source: EBRD Transition report 2009

  • Trade freedom: The openness of an economy to imports of goods and services and the ability of firms to export on a scale from 0 to 100, source: The Heritage Foundation

  • Investment freedom: The absence of restrictions on foreign investments on a scale from 0 to 100, source: The Heritage Foundation

  • Enterprise reform: index ranging from 0 to 4 reflecting the judgment of the EBRD’s Office of the Chief Economist about country-specific progress in credit policy reform, source: EBRD Transition report 2009

  • Competition policy: index ranging from 0 to 4 reflecting the judgment of the EBRD’s Office of the Chief Economist about country-specific progress in competition policy, source: EBRD Transition report 2009

  • Financial institutions: index ranging from 0 to 4 reflecting the judgment of the EBRD’s Office of the Chief Economist about country-specific progress in non-bank financial institutions, source: EBRD Transition report 2009

  • Large scale privatization: index ranging from 0 to 4 reflecting the judgment of the EBRD’s Office of the Chief Economist about country-specific progress in private ownership of firms, source: EBRD Transition report 2009

  • Price liberalization: index ranging from 0 to 4 reflecting the judgment of the EBRD’s Office of the Chief Economist about country-specific progress in market prices, source: EBRD Transition report 2009

  • Trade liberalization: index ranging from 0 to 4 reflecting the judgment of the EBRD’s Office of the Chief Economist about country-specific progress in liberalization of import and export, source: EBRD Transition report 2009

  • Banking liberalization: index ranging from 0 to 4 reflecting the judgment of the EBRD’s Office of the Chief Economist about country-specific progress in the realization of interest rates and credit allocation, source: EBRD Transition report 2009

More information on the institutional reforms can be found at http://www.heritage.org/ and http://www.ebrd.com/.

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Crabbé, K., Beine, M. (2014). Integration, Institutions and Export Specialization. In: Karasavvoglou, A., Polychronidou, P. (eds) Economic Crisis in Europe and the Balkans. Contributions to Economics. Springer, Heidelberg. https://doi.org/10.1007/978-3-319-00494-5_9

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