Central East European Countries’ accession into the European Union: role of extensive margin for trade in intermediate and final goods

We study the effect on trade in intermediates and final goods of the Central East European Countries’ (CEECs) accession into the European Union (EU) for the period 1999–2009. In doing so, we estimate a gravity model that incorporates the extensive margin of trade and accounts for firm heterogeneity. We capture the importance of production networks by including imports of intermediates as a determinant of a country’s exports of final goods. We find a positive and significant effect of the CEECs accession on EU trade in intermediate and final goods. Once the extensive margin of trade is accounted for, the effect of the CEECs accession into the EU is higher on trade in intermediate goods than on trade in final goods.The author acknowledges the support and collaboration of Project ECO2010-15863. We also would like to thank the participants of the research seminar held at the Universität Osnabrück, Institut für Empirische Wirtschaftsforschung, and the Seventh Annual Conference of the German Development Economics conference held in Berlin for their helpful comments and suggestions, which have been incorporated to the paper