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Comparative Advantage and the Welfare Impact of European Integration

Andrei Levchenko and Jing Zhang ()

No 18061, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper investigates the welfare gains from European trade integration, and the role of comparative advantage in determining the magnitude of those gains. We use a multisector Ricardian model implemented on 79 countries, and compare welfare in the 2000s to a counterfactual scenario in which East European countries are closed to trade. For West European countries, the mean welfare gain from trade integration with Eastern Europe is 0.16%, rang- ing from zero for Portugal to 0.4% for Austria. For East European countries, gains from trade are 9.23% at the mean, ranging from 2.85% for Russia to 20% for Estonia. For Eastern Europe, comparative advantage is a key determinant of the variation in the welfare gains: countries whose comparative advantage is most similar to Western Europe tend to gain less, while countries with technology most different from Western Europe gain the most.

JEL-codes: F11 F14 F15 (search for similar items in EconPapers)
Date: 2012-05
New Economics Papers: this item is included in nep-eur, nep-int and nep-tra
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Published as Andrei A. Levchenko & Jing Zhang, 2012. "Comparative advantage and the welfare impact of European integration," Economic Policy, CEPR & CES & MSH, vol. 27(72), pages 567-602, October.

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Journal Article: Comparative advantage and the welfare impact of European integration (2012) Downloads
Working Paper: Comparative Advantage and the Welfare Impact of European Integration (2012) Downloads
Working Paper: Comparative Advantage and the Welfare Impact of European Integration (2011) Downloads
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