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Abstract

International trade theory suggests that advanced trade integration may lead to higher level of IIT. The enlargement of the European Union during last decade is as a good example to analyse the IIT in agri-food products. The aim of the paper is to analyse the pattern and drivers of IIT within European Union between 1999 and 2010. Previous empirical studies fail to provide an exact link between the theory and the data. Thus, we employ a new empirical strategy developed to test the predictions of Helpman and Krugman (1985) model. At the country level, Belgium, France, Netherlands and Germany report the highest level of IIT within the EU. Our calculations mainly support the Cieslik’s (2005) proposal to find the missing link between empirics and theory of IIT. In addition, our results are robust to various IIT indices and subsamples.

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