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A Tale of (Almost) 1001 Coefficients: Deep and Heterogeneous Effects of the EU-Turkey Customs Union

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  • Mario Larch
  • Aiko F. Schmeißer
  • Joschka Wanner

Abstract

In view of the deferred start of negotiations for the modernization of the Customs Union between the EU and Turkey (CU-EUT), we look back and analyse the ex post trade consequences of the CU-EUT. Employing up-to-date econometric best practices for regional integration agreements, we quantify both total and heterogeneous trade effects of the CU-EUT. In contrast to most previous studies, our results indicate a significantly positive, large, and robust impact of the CU-EUT, implying an additional increase in EU-Turkey manufacturing trade by 55-65% compared to the previously active Ankara Agreement. We also provide evidence that the CU-EUT significantly increased Turkey’s trade with third countries. Additionally, a substantial heterogeneity in the CUEUT effect is found across different industries as well as for each of its member countries and the direction of trade. We link the heterogeneity of our up to 911 coefficient estimates to differences in initial trade costs and show that it cannot be ascribed to reductions in bilateral tariff rates.

Suggested Citation

  • Mario Larch & Aiko F. Schmeißer & Joschka Wanner, 2019. "A Tale of (Almost) 1001 Coefficients: Deep and Heterogeneous Effects of the EU-Turkey Customs Union," CESifo Working Paper Series 7498, CESifo.
    • Handle: RePEc:ces:ceswps:_7498
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    Cited by:

    1. Beniamino Quintieri & Giovanni Stamato, 2023. "Are preferential agreements beneficial to EU trade? New evidence from the EU–South Korea treaty," The World Economy, Wiley Blackwell, vol. 46(12), pages 3511-3541, December.
    2. Benjamin Jung, 2023. "The Trade Effects of the EU-South Korea Free Trade Agreement: Heterogeneity Across Time, Country Pairs, and Directions of Trade within Country Pairs," Open Economies Review, Springer, vol. 34(3), pages 617-656, July.

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    More about this item

    Keywords

    gravity model; European integration; country-specific effects;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration

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