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Trade Creation and Trade Diversion in the European Common Market: An appraisal of the evidence

Trade Creation and Trade Diversion in the European Common Market: An appraisal of the evidence *Menuscript received 19.2.74. The Munchester School in the income elasticity of demand for extra-area imports. This method was subsequently applied in a seven commodity breakdown by taking 1953-59 as the pre-integration and 1959-65 as the post-integration period (Balassa, 1967). The latter period has now been extended to 1970. In the following, the two sets of estimatea will be compared and the results of the new estimatcs will be discussed in some detail. Before reporting on the results, however, the error possibilities inherent in the method of estimation need to be discussed. As noted above, the method is based on the assumption that income elasticities of import demand would have remained unchanged in the absence of integration, i.e. that the establishment of the Common Market was the only major influence on changes in the pattern of EEC imports as between the pre-integration and the post-integration periods. This means, first of all, that the effects of price changes other than those brought about by integration are disregarded as are the effects of exchange rate changes. Apart from the problem of separating autonomous and induced price changes, efforts made to amend the method by introducing a price variable (adjusted for exchange http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Manchester School Wiley

Trade Creation and Trade Diversion in the European Common Market: An appraisal of the evidence

The Manchester School , Volume 42 (2) – Jun 1, 1974

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References (16)

Publisher
Wiley
Copyright
Copyright © 1974 Wiley Subscription Services, Inc., A Wiley Company
ISSN
1463-6786
eISSN
1467-9957
DOI
10.1111/j.1467-9957.1974.tb00105.x
Publisher site
See Article on Publisher Site

Abstract

*Menuscript received 19.2.74. The Munchester School in the income elasticity of demand for extra-area imports. This method was subsequently applied in a seven commodity breakdown by taking 1953-59 as the pre-integration and 1959-65 as the post-integration period (Balassa, 1967). The latter period has now been extended to 1970. In the following, the two sets of estimatea will be compared and the results of the new estimatcs will be discussed in some detail. Before reporting on the results, however, the error possibilities inherent in the method of estimation need to be discussed. As noted above, the method is based on the assumption that income elasticities of import demand would have remained unchanged in the absence of integration, i.e. that the establishment of the Common Market was the only major influence on changes in the pattern of EEC imports as between the pre-integration and the post-integration periods. This means, first of all, that the effects of price changes other than those brought about by integration are disregarded as are the effects of exchange rate changes. Apart from the problem of separating autonomous and induced price changes, efforts made to amend the method by introducing a price variable (adjusted for exchange

Journal

The Manchester SchoolWiley

Published: Jun 1, 1974

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