DETERMINANTS OF THE EXPORT STRUCTURE OF COUNTRIES IN CENTRAL AND EASTERN-EUROPE

The growth in exports from Central and Eastern Europe to Western marke ts suggests that entrepreneurs have responded to changed incentives by restructuring their production to capture new markets. The absence of change in the structure of exports, however, suggests that these rest ructuring efforts have not been significant. This article analyzes the magnitude of the change in export structure across the Central and Ea stern European countries in 1990-95, focusing in particular on trade w ith the European Union. It finds that imports of intermediate inputs a nd machinery are an important determinant of the changes in export str ucture. Sourcing of inputs from abroad is a major factor underlying th e expansion of exports to the European Union. Outward processing (subc ontracting) arrangements and foreign direct-investment have a smaller impact. Except for Poland, inflows of foreign direct investment are st atistically insignificant or negatively associated with measures of re vealed comparative advantage. This suggests that foreign investors hav e chosen sectors in which the Central and Eastern European countries w ere not relatively specialized under central planning.