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A Tale of Competition between Eastern and Southern Europe

Peter Egger and Kurt Kratena
Review of World Economics / Weltwirtschaftliches Archiv
Vol. 139, No. 1 (2003), pp. 114-130
Published by: Springer
Stable URL: http://www.jstor.org/stable/40440943
Page Count: 17
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A Tale of Competition between Eastern and Southern Europe
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Abstract

This paper assesses the relationship between EU manufacturing imports from the southern EU and the CEEC. First we set up an Almost Ideal Demand System (AIDS) for imports of 12 EU countries from EU-South and CEEC at the disaggregated NACE level, differentiating between final and intermediate goods. Then we analyze the correlation between the sign of elasticities of substitution and various explaining variables. Final goods imports are strongly complementary and intermediate goods imports are substitutive. An increase in the high-skilled to low-skilled labor ratio in the EU-South or in the degree of intra-EU multinationality lowers competition in intermediate goods trade between the EU-South and the CEEC.

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