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Deep Trade Agreements and FDI in Partial and General Equilibrium: A Structural Estimation Framework

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  • Larch,Mario
  • Yotov,Yoto Valentinov

Abstract

This paper quantifies the relationships between deep trade liberalization and foreigndirect investment. To this end, it focuses on the effects of deep trade agreements. The analysis relies on a structuralframework that simultaneously enables (i) estimating the direct impact of deep trade agreements on foreign directinvestment, (ii) translating the partial deep trade agreement estimates into general equilibrium effects onforeign direct investment; and (iii) obtaining partial deep trade agreement effects on trade and quantifying the impactof deep trade agreements on foreign direct investment through trade. The paper obtains sizeable, positive, andstatistically significant estimates of the effects of deep trade agreements on both trade and foreign directinvestment. A counterfactual analysis suggests that together with direct and indirect channels deep trade agreements have contributed.

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  • Larch,Mario & Yotov,Yoto Valentinov, 2023. "Deep Trade Agreements and FDI in Partial and General Equilibrium: A Structural Estimation Framework," Policy Research Working Paper Series 10338, The World Bank.
    • Handle: RePEc:wbk:wbrwps:10338
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    Cited by:

    1. Ridwan Ah Sheikh & Sunil Kanwar, 2024. "Do Deep Trade Agreements with Intellectual Property Provisions Actually Increase International Trade?," Working papers 344, Centre for Development Economics, Delhi School of Economics.

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    More about this item

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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