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On the relationship between the breadth of PTAs and trade flows

Author

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  • Falvey, Rod

    (Bond Business School, Bond University)

  • Foster-McGregor, Neil

    (UNU-MERIT, Maastricht University)

Abstract

This paper uses matching econometrics to extend the literature investigating the impact of Preferential Trading Arrangements (PTAs) on goods trade flows. Heterogeneity in PTAs is accounted for through a 'provision count index' derived from data provided in a recent World Bank study (Hofmann et al, 2017). PTA formation now involves two separate, sequential decisions - first, whether two trading partners should form a PTA and, second, if they do, how broad that agreement should be. We find that our explanatory variables are significant for both decisions, but often have opposing effects on each. Using our matched PTA and non-PTA groups of country-pairs, we estimate a dose response function which indicates that arrangements with few provisions and arrangements with many provisions do not appear to have a significant impact on goods trade flows between their members. PTAs in an intermediate range are shown to have a significant positive effect. We then relate these outcomes to the actual content of the PTAs using the concept of 'provision intensity'.

Suggested Citation

  • Falvey, Rod & Foster-McGregor, Neil, 2017. "On the relationship between the breadth of PTAs and trade flows," MERIT Working Papers 2017-038, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    • Handle: RePEc:unm:unumer:2017038
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    References listed on IDEAS

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    Cited by:

    1. Rod Falvey & Neil Foster-McGregor, 2022. "The breadth of preferential trade agreements and the margins of exports," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 158(1), pages 181-251, February.
    2. Michele Delera & Neil Foster-McGregor, 2020. "On PTAs and Bilateral Trade: Is GVC Trade Sensitive to the Breadth of Trade Policy Cooperation?," Economies, MDPI, vol. 8(4), pages 1-16, October.
    3. Campi, Mercedes & Dueñas, Marco, 2019. "Intellectual property rights, trade agreements, and international trade," Research Policy, Elsevier, vol. 48(3), pages 531-545.

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    More about this item

    Keywords

    Preferential Trade Agreements; Trade Flows; PTA Breadth;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F15 - International Economics - - Trade - - - Economic Integration
    • O24 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy

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