Trade liberalisation and product structure: the case of the Western Balkans

Abstract This paper addresses an important issue of an impact of trade liberalisation on export structure and product concentration, which, according to contemporary findings, have a strong influence on the dynamics of an economic growth. The analysis covers the region of the Western Balkans (WB) in years 1995 – 2013 with an emphasis on Stabilisation and Association Process (SAP) and CEFTA-2006 agreement, which formed the basis for the trade liberalisation in the region. The empirical results provide evidence that is in contrary to the evidence from other countries where trade liberalisation resulted in their deepened specialisation in production and export of raw materials and labour-intensive goods. Moreover, liberalisation processes turned out not to have had much impact on product concentration of the WB’s trade. Finally, substitutability of capital and labour factors in the production process of exported goods was confirmed. Key words: Western Balkans, international trade, trad