Trade performances and technology in the enlarged European Union

Abstract

PurposeThe purpose of this paper is to analyse the role of the enlargement process of the European Union as a factor fostering international competitiveness of EU Member States. The paper argues that the economic integration process has reduced the technological gap between old and new EU Member States, and this pattern of technological innovation can partially explain the strong impulse on the export dynamics of European countries.Design/methodology/approachThe paper builds an augmented gravity model by including the role of technological innovation, proxied by the stock of knowledge at the sector level. The authors gather together information on patents applied to international offices and bilateral export flows available from COMTRADE dataset.FindingsBy using a dynamic panel data estimator the authors find three main empirical evidences. First, the enlargement process has produced an overall larger positive impact on export flows for new Members than for old ones, and more importantly that sectors with the higher technological content have received the strongest impulse. Second, the augmented gravity model allows shaping the crucial role of technological innovation in fostering export competitiveness. Third, this impact seems to be stronger for old EU Member States than for new ones.Research limitations/implicationsThe major limitation concerns time span adopted in this work. By expanding the dataset to further years it could be possible to better disentangle the effects also related to the new wave of the EU enlargement.Social implicationsThe policy implication derived is that the more the new EU Members catch up technologically as a result of the integration process, the more they will benefit in terms of economic development.Originality/valueThe major originality of this paper is the construction of an augmented gravity model by including the role of technological innovation, applied to distinguished manufacturing sectors in a dynamic panel setting.