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Since McCallum's (1995) finding of surprisingly high border effects on trade between the US and Canada, there have been a number of studies on other parts of the world, and improvements made to the gravity model to measure this effect accurately. This paper suggests some other modifications to the model, and applies it to a region of the world that presents a distinctly interesting case. Changes in border effects of formerly socialist countries in Central and East Europe, and countries in the former Soviet Union are analyzed during 1976-2002 at country and sectoral levels, and also with respect to blocs of countries. A discussion on cross-country variations in border effects follows the computations. [ABSTRACT FROM AUTHOR]

This paper analyses trends in different components of trade of transition countries. To explain the cross-country differences, the paper points out the important distinction between the determinants of inter-industry trade and intra-industry trade (IIT), and horizontal and vertical IIT. Using varieties of gravity models, it is shown that variables from Increasing Returns Trade Theory, such as scale economies, similarity of income levels, and number of varieties produced play important roles in IIT, especially in horizontal IIT, whereas factors such as comparative advantage, dissimilarity in income levels, and having more developed trade partners from Heckscher–Ohlin Trade Theory are crucial in determining inter-industry trade and vertical IIT to a lesser degree. [Copyright &y& Elsevier]