Trade Integration in Enlarged Europeanunion - Poland's Road to Success?

Abstract

The paper focuses on Poland's distinctly changing foreign trade patterns in the course of economic transformation and EU accession. In order to shed more light on the structure of Poland's integration into the European division of labor the Polish trade flows are analyzed by applying a filtered gravity approach. This model combines a trade-type-decomposition of trade - distinguishing between inter-industry trade as well as vertical and horizontal intra-industry trade - with a gravity approach of the country model type. The estimates show that the rapidly growing exports to Western Europe go in line with a significantly higher share of both types of intra-trade of intra-trade with these countries, in particular with Poland's main partner Germany, indicating a growing exchange of technology intensive goods. Apparently, Poland's economy has been integrated into Western European networks of production. In addition, the estimates show a regional integration with the Visegrad partners characterized by a perceptible level of intra-industry trade as well. It is concluded that Poland's extensive participation in the Western and Central European division of labor contributes significantly to the modernization of the Polish economy.