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Does the euro increase the complexity of exported goods? The case of Estonia

Piotr Gabrielczak and Tomasz Serwach
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Piotr Gabrielczak: Faculty of Economics and Sociology, University of Lodz
Tomasz Serwach: Faculty of Economics and Sociology, University of Lodz

No 4/2017, Lodz Economics Working Papers from University of Lodz, Faculty of Economics and Sociology

Abstract: The goal of this article is to assess the impact of the euro adoption on the complexity of goods in Estonian exports. Ricardian and Heckscher-Ohlin models of trade would predict that such a policy decision (seen as an example of trade liberalization) may result in specialization in the production of either more or less sophisticated goods – the effect depends on country’s technological advancement and factor endowment. At the same time intensified FDI flows may enhance engagement of a country in international production chains with ambiguous consequences for exports complexity. Since it is impossible to a priori predict the effect monetary integration may have on the complexity, it is reasonable to conduct an empirical (and a posteriori) analysis. The authors applied the Synthetic Control Method to compare the observedpost-adoption levels of exports complexity in Estonia with the counterfactual values with Estoniaremaining outside of the Eurozone. The obtained results show that the adoption of the euro has resulted inthe increase in complexity of exported goods (compared to counterfactual scenario)

Keywords: euro; international trade; complexity; treatment; Estonia (search for similar items in EconPapers)
JEL-codes: C21 F14 F15 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-int
Date: 2017-01
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