Growing Olive Oil Export and Intra-Industry Trade in Mediterranean Countries: Application of Gravity Model

Abstract

While olive oil production is spreading to the non-traditional producer countries, including the US, Australia, and New Zealand, Mediterranean countries are still major producers and exporters. However, little is known about their olive oil exports simultaneously growing in tandem with their large volume of imports. This paper examines the factors that affect olive oil exports and imports in Mediterranean countries. Using balanced panel data of olive oil trade in Mediterranean countries from 1998 to 2016, we estimated the commodity-specific gravity model. Results suggest that an increase in the overall bilateral size of trading partners positively affects the flow of olive oil trade. The difference in factor endowments has a negative impact on exports, whereas its effect is positive on their imports. The members of the European Union (EU) are competitive in olive oil export, and the volume of its import is large among the EU countries whose per capita income and demand properties are similar. These results support Linder’s hypothesis rather than the predictions from the traditional Heckscher–Ohlin trade theory. The simultaneous export and import of olive oil in Mediterranean countries implies the relevance of a growing intra-industry trade rather than a country’s specialization following its comparative advantage.

Patterns of specialisation by country and sector in olive applications

“…In addition, this is one of the measurements used for the identification of value chains with comparative advantages [26,6]. Several studies [27] have analysed trade patterns of specialisation in different sectors of the economy; in the natural resources [28], agrofood industry [29,30] and olive oil sector exports and import analysis [31,32]. The level of specialisation through internationalisation could generate advantages around the value chain and have an influence on technological upgrading [15,33].…”

The Influence of an Export Manager on Export Marketing Policies: Evidence from Exporting Olive Oil Companies in Crete

“…Although countries like Greece which specialize in the production of olive oil should have a comparative advantage in this new environment, competition will arise both in non-traditional producer countries and producer countries. As such, two directions for promoting olive oil exports are emerging; one is to encourage the production of olive oil at lower prices in accordance with the law of comparative advantage, and the other is to focus on producing differentiated olive oil that will meet improvements in quality to foster a competitive advantage (Kashiwagi et al 2020).…”

The performance of the Tunisian olive oil exports within the new distribution of world demand

“…At the international level, Tunisia is ranked the second world producer of olive oil after the European Union and the fourth exporter, behind Spain, Italy and Greece.They contribute, together, to over 75% of production and have a comparative advantage in the production and export of olive oil (Kashiwagi et al, 2020;Klonaris and Agiangkatzoglou, 2018). Tunisia contribute with 10% of the world production and 20% of total exports.…”