Which Commercial Partners are Important for the Most Recently Admitted EU Countries?

Abstract

This article aims to detect the degree of trade integration since the fifth EU enlargement in 2004 between the EU15 and the 10 new EU members (EU10). We develop a theoretical framework whose principal building blocks derive from Anderson and van Wincoop (2003). Our empirical analysis implements data of trade flows between EU10 countries and 180 partners from 1999 to 2011. Using the difference-in-differences strategy, we estimate a gravity equation that controls for unobservable heterogeneous characteristics. Our results show that though trade exchanges between the EU10 and EU15 intensified after 2004, the impact of integration has been much more significant to the EU10.