Effects of Trade Liberalization in Croatia: An Approximation of the Integration Effects with the EU

Economic integration can cause significant adjustment costs and call for economic structure flexibility which will make the relocation of production factors within or between industries less expensive. Based on new trade theory, the integrated economy approach allows an insight into different patterns of trade as an approximation of the expected adjustment costs. In light of the EU-enlargement and the expected Croatian accession the aim is to analyse the effects of Croatian trade liberalization in order to stress the importance of structural adjustment in the process of economic integration and point at industries which will be exposed to significant adjustment costs