DOES EU TRADE INTEGRATION SUPPORT EXPORT PROMOTION: PROBIT ANALYSIS, EVIDENCE FROM KOSOVO

Abstract

This article aims to explore European Union (EU) trade opportunities in the con-text of regional integration for Kosovo. Although the EU plays a role in investment promotion, monitoring, and settlement of trade disputes, there is a dilemma about benefits from EU trade openness for the countries of the region. According to the Infant Industry approach, there is a trade-off between European integration and benefits from free trade agreements in countries such as Kosovo, taking into consideration the unfavorable position of local firms due to political challenges and the long transition period for this country. This article aims to estimate whether trade integration is a significant condition for the export performance of firms or if, on the contrary, firm performance has a strong impact on export performance. We explore the link between firm characteristics and market integration by analyzing two different groups of firms, exporting and non-exporting firms, and their access to the EU market. Therefore, the core research questions of the paper are a) is the external financing a significant factor to support the firms’ export; b) Did technolog-ical process and improvement of production capabilities of the firms enables export promotion; c) Did the level of education respectively human resources of the firms could have a positive impact on export growth. Based on Probit model analyses, the main conclusions are as follows: exporting firms obtained external funding, which they invested in production capacity, and non-exporting firms used their own limited financial resources. Of note is that for both groups, education level does not matter in that it does not increase the probability of firms accessing the EU market.