Most countries commonly classified as „in transition“ are still recognisably different from other countries with a similar income per capita in some respects: a larger share of their work force is in industry, they use more energy, they have a more extensive infrastructure and invest more in...

We suggest that bilateral gravity equations augmented by ad hoc measures of absolute supply-side country differences are misspecified. Building on Haveman and Hummels (2004), we develop and test an alternative specification rooted in incomplete specialization that views bilateral gravity...