Trade liberalization and institutional reforms

Angela Cheptea

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Abstract: The accession of Central and Eastern European (CEE) countries to the European Union (EU) is expected to lead to the new member countries becoming more like the older members, including in terms of trade. In this paper, we focus on two factors promoting CEE–EU trade integration: trade liberalization and institutional reforms. Measures of trade liberalization undertaken by both parties during the 1990s were very substantial, but did not always produce the expected upsurge of regional trade flows. Much less progress has been made in improving the functioning of CEE institutions (e.g., progress in the privatization process or in reducing corruption). Countries where most important changes at the institutional level occurred were also those that most increased their trade with the EU. Comparing the impact of these two factors, we find that improving institutions in CEE countries can generate as much trade as the removal of all tariff and non-tariff barriers. The paper also addresses the issue of the presence of reversed causality between trade and institutions, and the pro-trade effect of institutional similarity.

Keywords: TRADE LIBERALIZATION; INSTITUTION; TRADE CREATION; CENTRAL AND EASTERN EUROPE (search for similar items in EconPapers)
Date: 2007
Note: View the original document on HAL open archive server: https://hal.science/hal-02360551v1
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Citations: View citations in EconPapers (4)

Published in Economics of Transition, 2007, 15 (2), pp.211-255. ⟨10.1111/j.1468-0351.2007.00286.x⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-02360551

DOI: 10.1111/j.1468-0351.2007.00286.x

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