Hub-and-spoke free trade areas: theory and evidence from Israel
AbstractWe study how the sequential formation of free trade areas affects trade flows between member countries. In a three-country, three-good model of comparative advantage if two countries have an FTA, and both sign a similar agreement with the third, trade between the two decreases. However, if only one of them signs an additional FTA, a hub- and-spoke pattern arises, and trade between the initial members increases. Israel's experience lends strong support to our model: trade between Israel and the EU, subject to an FTA since 1975, increased by an additional 29% after the introduction of the US-Israel FTA in 1985.
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Bibliographic InfoArticle provided by Canadian Economics Association in its journal Canadian Journal of Economics.
Volume (Year): 45 (2012)
Issue (Month): 3 (August)
Contact details of provider:
Postal: Canadian Economics Association Prof. Steven Ambler, Secretary-Treasurer c/o Olivier Lebert, CEA/CJE/CPP Office C.P. 35006, 1221 Fleury Est Montréal, Québec, Canada H2C 3K4
Web page: http://economics.ca/cje/
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Other versions of this item:
- George Deltas & Klaus Desmet & Giovanni Facchini, 2012. "Hub-and-spoke free trade areas: Theory and evidence from Israel," Working Papers 2012-01, Instituto Madrileño de Estudios Avanzados (IMDEA) Ciencias Sociales.
- F11 - International Economics - - Trade - - - Neoclassical Models of Trade
- F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
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- Juyoung Cheong & Do Won Kwak & Kam Ki Tang, 2014. "Can Trade Agreements Curtail Trade Creation and Prevent Trade Diversion," Discussion Papers Series 500, School of Economics, University of Queensland, Australia.
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