Abstract
We analyze the effect of the large set of theoretically motivated determinants on international trade among European countries during the period 1992-2008. The determinats cover areas of culture, institutions, infrastructure, and geography, including trade directions.
We analyze trade in three types of goods: raw materials, parts and components, and capital goods. For each type of goods we differentiate trade in flows, extensive margin, and intensive margin.
Methodologically we first derive fixed effects related to unique pairs of countries in terms of exports andimports. Then we explain the fixed effects with the set of trade determinants.
We show number of detailed results that could be summarized in a following way. Geographical, cultural, and institutional determinants exhibit intuitively correct but varying effects.
Soft and hard infrastructures exhibit strong and positive effect. Trade directions between new and old EU members plays a key role in the European trade.