Tiiu Paas

Gravity Approach for Modeling Trade Flows Between Estonia and the Main Trading Partners

The advantages of using gravity approach for modeling transition processes in foreign trade are the ability of gravity models to explain international trade pattern under the conditions of comparatively little amount of data and validity of theoretical background of the model to the economies in transition. The both advantages are important when modeling transit ion processes. The results of the use gravity approach to explore international trade pattern of Estonia as a country with a small, open and comparatively successful transitional economy allow us to conclude that economies in transition should look for a regional niche to penetrate into the world market. Estonia has an excellent potential to develop trade relations within the Baltic Sea region countries. Estonia’s situation is certainly not unique, and conclusions presented in this paper could be applied to analysis of international trade pattern in other economies in transition.

Regional Integration and International Trade in the Context of EU Eastward Enlargement

The paper aims to explore international trade flows of the countries involved in the EU eastward enlargement processes – the current EU members (EU15) and the candidate countries (CC12). The empirical results of the study allow us to conclude that the behaviour of bilateral trade flows within the countries involved in EU eastward enlargement accords to the normal rules of gravitation, having statistically significant spatial biases caused by the trade relations, between the Baltic Sea Region (BSR) countries (the BSR bias), the border countries (the border bias) and the EU member and candidate countries (the East-West bias). The East-West trade relations are still rather weakly developed and there is a statistically significant difference in international trade patterns between the two groups – the current EU members and the applicant countries. The lessons of the Baltic Sea Region in integrating countries with different economic and political backgrounds and developing bilateral trade relations are valuable in supporting EU eastward enlargement and the reintegration of new member countries into Europe.

Labour Market Flexibility and Migration in the Baltic States: Macro Evidences

The Eastern enlargement of the European Union and the requirements of the European Monetary Union call for increased flexibility of labour markets in both the current EU members and candidate countries. If labour markets and institutions are rigid in the monetary union, market disequilibrium is likely to grow. The present paper aims to give a macroeconomic overview of the Baltic States’ labour market in the period 1995?2001, laying emphasis on the issues of labour market flexibility and labour migration in the context of EU eastward enlargement. The Baltic States comprise a particular regional cluster and an interesting case for making generalizations about the processes of transition and EU eastward enlargement, and developing a new field of economics - the economics of transition and integration. In real terms, one has to admit, the influence of the Baltic economies on the EU eastward enlargement processes can hardly be significant, as the very small size of the Baltic markets bears no comparison with either the markets of the current EU member states (EU15) or the other candidate countries (CC). The Baltic States have dutifully observed the main international standards regulating labour relations in accordance with the EU rules. Comparing the Baltic States’ labour market with those of EU15 and the other candidate countries, one comes to the conclusion that the Baltic States’ labour markets are flexible. The most flexible among them is the Estonian labour market followed by that of Latvia. However, predictably, after joining the EU, the labour markets of the new members may become more rigid due to the increasing influence on them of institutions and trade unions, and due to more generous funding of labour market policies. Moreover, a decline of wage flexibility can be predicted. Free movement of labour as a natural consequence of EU enlargement will also exert pressure on the Baltic labour markets due to the possible migration of better-qualified and flexible labour force, and cross-border movement of labour within the Baltic Sea Region countries. Coupled with ageing of the population, it may increase shortage of skilled labour. Consequently, if labour mobility increases and labour market flexibility declines remarkably during the enlargement processes, market disequilibrium is likely to grow in the Baltic States as well.

The gravity approach for modeling international trade patterns for economies in transition

The advantages of using the gravity approach for modeling transition processes in foreign trade are the ability of gravity models to explain international trade patterns under the conditions of comparatively little data and for validity of theoretical background of the model to the economies in transition. Both advantages are important when modeling transition processes. The results from using the gravity approach to explore the international trade patterns of Estonia as a country with a small, open, and comparatively successful transitional economy allow us to conclude that economies in transition should look for a regional niche to penetrate into the world market. Estonia has an excellent potential to develop trade relations within the Baltic Sea region (Baltic Rim) countries. Estonias situation is certainly not unique, and conclusions presented in this paper could be applied to analyses of international trade patterns in other economies in transition.

Econometric Analysis of Income Convergence in Selected EU Countries and Their Nuts 3 Level Regions

The paper estimates equations for regional income convergence in selected EU countries and their NUTS 3 level regions during the European Union pre-enlargement period (1995–2002), using both spatial and non-spatial approaches. There has been absolute income convergence between regions in both the groups of countries looked at, the countries of the EU15, or the old member states, and the new member states or NMS. When national effects are included in convergence equations using country dummies, no evidence of regional income convergence can be observed. The results of the analysis assert the importance of regional policies in inhibiting the increase of regional income disparities and improving conditions for income growth, particularly within the new member states.

European Trade Integration in the Baltic Sea Region - A Gravity Model Based Analysis

The paper explores regional trade integration of the countries involved in the EU eastward enlargement (EU-25) processes distinguishing the possible regional trade clusters within EU-25 that may support integration of the EU-15 and the new member states. We examine whether the gravity equation based on the new trade theory describes trade integration of the EU-25 countries, and whether the results of a gravity model based analysis may be different in the case of the Baltic Sea region (BSR). The gravity models are estimated based on panel data for the years 1993 to 2002. The results of our analysis indicate that the BSR is forming an exception within EU-25. The BSR trade cannot be explained as much with New Trade Theories as in the case of the whole EU. The BSR countries have different factor endowments and the intensive trade relations between the BSR countries are mainly based on comparative advantages.

Contagion of financial crises: what does the empirical evidence show?

Purpose – The purpose of this paper is to give an overview of variability of empirical results of several financial contagion studies, taking into account the role of financial markets, data sets and the applied definitions and methods that may explain the variability of empirical evidence.Design/methodology/approach – The authors used qualitative analysis of published research materials about previous financial crises and analyzed the variability of empirical results of around 75 studies of financial contagion, taking into account the particularities of financial markets, data sets and tests methods.Findings – The results of the analysis show that empirical studies provide heterogeneous results depending on applied definitions and methods, as well as chosen crises, destination countries and financial indices. Summing up all the relevant empirical findings the results supporting the contagion hypothesis are in clear dominance, but taking into account differences in definitions and testing methodologies th...

Emigration after EU Enlargement: Was There a Brain Drain Effect in the Case of Estonia?

The study analyzes changes in emigration from Estonia in order to shed more light on East–West migration, contributing to the main debate on “brain drain” by focusing on educational differences in emigration. We use anonymous individual level data for all emigrants from the register-based Estonian Emigration Database compiled by Statistics Estonia for the period 2000–2008. The analysis shows that there has been no significant brain drain from Estonia as a new EU member state during this period. Moreover, we find evidence of a spreading of the emigration norm into a wider range of population groups, including the less educated, since Estonia joined the European Union in 2004.

Is institutional trust related to pro-immigrant attitudes? A pan-European evidence

This paper examines the factors that are related to attitudes toward immigrants in Europe, with a particular focus on the role of institutional trust in shaping these attitudes. We go one step further compared to previous studies by investigating separately two different groups of people – members of the ethnic majority and ethnic minority populations in European countries. We use data from the European Social Survey fifth round database for 25 countries. The results of the paper show that trust in institutions is the variable that is most strongly associated with the attitudes toward immigrants implying on the importance of fair and supportive operation of political institutions to move toward more immigrant-tolerant environment and become an attractive destination country in the global competition of talents. The findings also indicate that not all of the main determinants of the attitudes toward immigrants drawn from the most common theoretical explanations seem to explain the variation of the attitudes toward immigrants among ethnic minority populations the same way as they explain it in the case of ethnic majority populations.

A Comparative Analysis of National Innovation Performance: The Baltic States in the EU Context

This paper bridges two approaches to assess national innovation performance based on European Innovation Scoreboard (EIS) composite indicators and the analysis of the factors that may be behind these indicators. The main focus of the study is on analysing the innovation performance of the Baltic States – small countries with similar post-socialist path dependence. Our aim is to explore what factors have been most influential in developing the different levels of innovation performance in these countries, and whether these differences are also captured by innovation measurement indicators. Our analysis shows that the inability to sufficiently capture the quality of human capital, the small economy effect (i.e. high dependence on single enterprises in a sector) and data availability issues represent remarkable measurement problems. The measurement results may also be biased as a result of self-reporting indicators. This conclusion was confirmed by comparing the EIS evaluations with the results of our assessment via factor analysis. The results are robust. Estonian innovation performance seems to be ahead of the other two Baltic countries; the main causes have been the successful attraction of foreign investment, favourable tax policy and possible positive spillover effects from the Nordic neighbourhood, particularly Finland and Sweden.