Question
In 2004-2007 the EU expanded to take in ten new members from Central and Eastern Europe, as well as Cyprus and Malta. Suppose that you
In 2004-2007 the EU expanded to take in ten new members from Central and Eastern Europe, as well as Cyprus and Malta. Suppose that you estimated the gravity equation of international trade across Europe in 2003 and you estimated it again in 2012. Comparing the estimates of the trade gravity constant B in 2003 vs 2012 you would expect:
Select one:
a.
The 2012 estimate to be higher because EU accession led to faster GDP growth and, hence, more trade
b.
None of these answers is correct
c.
The 2012 estimate to be higher because the impediments to trade were reduced by EU accession
d.
The 2003 estimate to be higher because many Eastern Europeans migrated to the older EU countries
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