TRADE SPECIALISATION AND ECONOMIC CONVERGENCE:EVIDENCE FROM TWO EASTERN EUROPEAN COUNTRIES

This paper analyses trade specialisation dynamics in two Eastern European countries(Romania and Bulgaria – EEC-2) vis-à-vis the core EU member states (EU-15) over theperiod 1990-2006. Specifically, we focus on whether there is a shift towards intra-industrytrade leading to economic convergence and technological catch-up. We use recentlydeveloped static (FEM, REM and FEVD) and dynamic (GMM) panel data methods whichtake into account possible heterogeneity. Our empirical results indicate that intra-industrytrade has indeed increased, but it is of the vertical rather than the horizontal type, resulting incomplementary rather than competitive production patterns....