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Do Customs Union Members Engage in More Bilateral Trade than Free‐Trade Agreement Members?

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  • Jayjit Roy

Abstract

This paper provides the first empirical analysis directly comparing the effects of customs unions (CUs) and free‐trade agreements (FTAs) on members’ bilateral trade, while addressing the biases arising from log‐linearization of the gravity model and crucial time‐invariant unobservables. Since Fiorentino et al. (2007) question the popularity of CUs relative to FTAs, considering the latter to be more practical in the current trading climate, such a comparison seems especially relevant. While Baier and Bergstrand (2007) find an FTA to approximately double members’ bilateral trade after 10 years, the results of this paper find CUs to have had a much larger impact than FTAs.

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  • Jayjit Roy, 2010. "Do Customs Union Members Engage in More Bilateral Trade than Free‐Trade Agreement Members?," Review of International Economics, Wiley Blackwell, vol. 18(4), pages 663-681, September.
    • Handle: RePEc:bla:reviec:v:18:y:2010:i:4:p:663-681
    DOI: 10.1111/j.1467-9396.2010.00904.x
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    1. Fiorentino, Roberto V. & Verdeja, Luis & Toqueboeuf, Christelle, 2007. "The changing landscape of regional trade agreements: 2006 Update," WTO Discussion Papers 12, World Trade Organization (WTO), Economic Research and Statistics Division.
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    • F1 - International Economics - - Trade

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