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The determinants of service exports from Central and Eastern Europe

Ivan Kandilov and Thomas Grennes

The Economics of Transition, 2010, vol. 18, issue 4, 763-794

Abstract: The transition economies of Central and Eastern Europe (CEE) have become important exporters of many types of services to Western Europe. We identify the sources of CEE’s advantages over competing exporters, such as India, China and Brazil, using disaggregated data on service exports and a novel estimation technique for the gravity equation. Our results indicate that the importance of geographical distance varies substantially across types of service exports. Geography is important for exports of construction services, but it has a negligible impact on computer‐related services. However, the relative quality of legal institutions influences trade across a broad range of service categories. The results demonstrate that aggregating services that are not homogeneous could conceal important differences in the effects of geographical distance and other variables on the pattern of service trade.

Date: 2010
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