engleski

Intensive and extensive margins of Croatian manufacturing exports : evidence from 2000-2012 period

This paper investigates the development of intensive and extensive export margins using augmented gravity model on the industry level data for Croatia during the 2000-2012 period. During this period important events on national and global level occurred with the significant implications for trade flows. On the national level: signing of Stabilization and Association Agreement (SAA) in 2001 and Croatia’s signing of the Central European Free Trade Agreement 2006 (CEFTA). Moreover, in 2011, Croatia began applying protocols on the rules of origin providing diagonal cumulation (DC) between CEFTA parties involved in the Stabilisation and Association Process (SAP) and European Union. Also, during observed time period, financial crisis originating in the United States, spread to the rest of the world and the sovereign debt crisis in European Union resulted in low economic growth in the whole Europe. Sharp drop in economic activity was particularly noticed in Croatia, where manufacturing sector lost more than 50, 000 workers (around 17% of total workforce in manufacturing sector) and the number of firms decreased by 2, 650 (around 11% of all firms in manufacturing sector). We use augmented gravity model, where apart from standard variables used in gravity equations, dummy variables for trading partners under preferential trading systems are included to explain changes in export activity of Croatian firms across industrial divisions during observed period. Separate analysis is carried out for exports of intermediate, consumption and capital goods, defined using Broad Economic Categories classification. Our results show that SAA and DC significantly affected intensive export margin (average exports across industry divisions), specially exports of consumption goods, while the global trade collapse affected negatively intensive margin and the extensive trade margin (number of firms across industry divisions exporting to foreign markets).

economic crisis; manufacturing sector; intensive and extensive export margins; gravity model

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