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Abstract
The present study examines factor content
in the CEE transition country agricultural trade.
However, deviating from the traditional approach, we
do not test the HOV prediction. Instead, we examine the
theoretical predictions that relate the factor content of
international trade to cross-country differences in
technology and endowments. Our empirical findings
suggest that factor content between agricultural exports
and imports is rather similar in CEE. In order to
explain the general lack of the CEE agricultural
specialisation and the observed paradox, we attempt to
identify the role of transaction costs and market
imperfections in determining factor content in
agricultural production and trade. We find that
technological differences and factor endowment are only
weak determinants of country specialisation.
Transaction costs and market imperfections distort farm
specialisation and organisation in CEE, and hence factor
content in traded agricultural goods.