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Testing the validity of the Linder hypothesis for Croatia

Jošić Hrvoje () and Metelko Matej ()
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Metelko Matej: University of Zagreb Faculty of Economics and Business,Zagreb, Croatia

Croatian Review of Economic, Business and Social Statistics, 2018, vol. 4, issue 1, 62-73

Abstract: This paper presents empirical evidence on the validity of the Linder hypothesis in the case of Croatia. According to the Linder hypothesis, one of the new theories of international trade, countries with a similar level of income per capita should trade more. In order to investigate the trade pattern of Croatia's international trade, a panel regression model is formulated including 184 Croatia's import partner countries in the period from 2000 to 2016. The Linder effect was displayed and calculated using the Linder variable expressed as an absolute difference between GDP per capita of the importing and the exporting country. The cross-country panel regression model is estimated using Pooled OLS, Fixed and Random effects models. Results of the analysis have shown that the validity of the Linder hypothesis for Croatia cannot be accepted. Instead, the structure of Croatia's trade is in line with the gravity model of international trade.

Keywords: Croatia; gravity model of international trade; Linder hypothesis; panel data (search for similar items in EconPapers)
Date: 2018
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