European Union and Trade Integration: Does the Home Bias Puzzle Matter?/Uni

This paper analyses the size of the border effect or home bias within the
European Union (EU) with the aim to quantify its impact in the trade integration
process which started in 1992. The gravity model serves as a general framework
where the use of sectoral data allows obtaining a more accurate measure
of the border effects. The econometric analysis applied to a gravity model
that contains a high disaggregation in the data introduces heteroskedasticity
problems together with the presence of zero values, therefore, in order to obtain
consistent estimates, the use of the Poisson Pseudo-Maximum Likelihood
estimation method is recommended. Our results show that the bilateral trade
flows depend upon the size and proximity of the trade partners, together with
other variables as adjacency or language. Evidence in favour of a positive and
diminishing border effect has been found for the period 1995-2006 and it
accounts for 20% to 22% within the EU-19.
Journal: 
32
Authors: 
Valeriano Martínez San Román
Marta Bengoa Calvo
Blanca Sánchez-Robles Rute
Attached file: 

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