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An Evaluation of Swiss Free Trade Agreements Using Matching Econometrics

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Listed:
  • Jeffrey H. Bergstrand
  • Scott L. Baier

Abstract

To date, most estimates of the effects of free trade agreements (FTAs) on international trade flows have used the gravity equation in international trade, but have often yielded highly "fragile" estimates. This paper instead employs a non-parametric "matching" statistical estimation technique of BAIER and BERGSTRAND (2009), using methods developed by ABADIE and IMBENS (2006), to evaluate ex post the impact of Swiss FTAs on Swiss trade flows, including notably the recent Switzerland-Mexico Free Trade Agreement (FTA) on Swiss-Mexico trade flows. The main empirical finding is that the Swiss-Mexico FTA of 2001 increased bilateral trade about 37 percent, after only four years in place. This result is consistent with the impacts (over 10-15 years) of other Swiss FTAs. Moreover, these results are consistent with the findings in BAIER and BERGSTRAND (2007) using parametric panel techniques and with those in BAIER and BERGSTRAND (2009) using matching econometrics that the likely impact of such an agreement on Swiss-Mexico trade after 10-15 years should be approximately 100 percent.

Suggested Citation

  • Jeffrey H. Bergstrand & Scott L. Baier, 2010. "An Evaluation of Swiss Free Trade Agreements Using Matching Econometrics," Aussenwirtschaft, University of St. Gallen, School of Economics and Political Science, Swiss Institute for International Economics and Applied Economics Research, vol. 65(3), pages 239-250, September.
    • Handle: RePEc:usg:auswrt:2010:65:3:239-250
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    File URL: http://ux-tauri.unisg.ch/RePEc/usg/auswrt/AW_65-03__01_Bergstrand-Baier.pdf
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    References listed on IDEAS

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    1. James E. Anderson & Eric van Wincoop, 2004. "Trade Costs," Journal of Economic Literature, American Economic Association, vol. 42(3), pages 691-751, September.
    2. Baier, Scott L. & Bergstrand, Jeffrey H., 2009. "Bonus vetus OLS: A simple method for approximating international trade-cost effects using the gravity equation," Journal of International Economics, Elsevier, vol. 77(1), pages 77-85, February.
    3. James E. Anderson & Eric van Wincoop, 2003. "Gravity with Gravitas: A Solution to the Border Puzzle," American Economic Review, American Economic Association, vol. 93(1), pages 170-192, March.
    4. Scott L. Baier & Jeffrey H. Bergstrand & Peter Egger & Patrick A. McLaughlin, 2008. "Do Economic Integration Agreements Actually Work? Issues in Understanding the Causes and Consequences of the Growth of Regionalism," The World Economy, Wiley Blackwell, vol. 31(4), pages 461-497, April.
    5. Bergstrand, Jeffrey H, 1985. "The Gravity Equation in International Trade: Some Microeconomic Foundations and Empirical Evidence," The Review of Economics and Statistics, MIT Press, vol. 67(3), pages 474-481, August.
    6. Baier, Scott L. & Bergstrand, Jeffrey H., 2009. "Estimating the effects of free trade agreements on international trade flows using matching econometrics," Journal of International Economics, Elsevier, vol. 77(1), pages 63-76, February.
    7. Greenaway, David & Milner, Chris, 2002. "Regionalism and Gravity," Scottish Journal of Political Economy, Scottish Economic Society, vol. 49(5), pages 574-585, December.
    8. Simon J. Evenett & Wolfgang Keller, 2002. "On Theories Explaining the Success of the Gravity Equation," Journal of Political Economy, University of Chicago Press, vol. 110(2), pages 281-316, April.
    9. Baier, Scott L. & Bergstrand, Jeffrey H., 2004. "Economic determinants of free trade agreements," Journal of International Economics, Elsevier, vol. 64(1), pages 29-63, October.
    10. David Greenaway & Chris Milner, 2002. "Regionalism and Gravity," Scottish Journal of Political Economy, Scottish Economic Society, vol. 49(5), pages 574-585, November.
    11. Baier, Scott L. & Bergstrand, Jeffrey H., 2007. "Do free trade agreements actually increase members' international trade?," Journal of International Economics, Elsevier, vol. 71(1), pages 72-95, March.
    12. Alberto Abadie & Guido W. Imbens, 2006. "Large Sample Properties of Matching Estimators for Average Treatment Effects," Econometrica, Econometric Society, vol. 74(1), pages 235-267, January.
    13. Anderson, James E, 1979. "A Theoretical Foundation for the Gravity Equation," American Economic Review, American Economic Association, vol. 69(1), pages 106-116, March.
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    Cited by:

    1. Jönsson, Oskar Martin & Presberger, David & Pfister, Stephan & Bernauer, Thomas, 2023. "How to estimate whether preferential trade agreements contribute to international environmental impact shifting. A new methodology and empirical illustration for Switzerland," Ecological Economics, Elsevier, vol. 205(C).
    2. Ritzel, Christian & Kohler, Andreas, 2017. "Protectionism, how stupid is this? The causal effect of free trade for the world’s poorest countries: Evidence from a quasi-experiment in Switzerland," Journal of Policy Modeling, Elsevier, vol. 39(6), pages 1007-1018.

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    More about this item

    Keywords

    International Trade; Free Trade Agreements; Matching Econometrics;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F15 - International Economics - - Trade - - - Economic Integration

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