Advanced Search
MyIDEAS: Login to save this paper or follow this series

Analyzing the Impact of Trade Preferences in Gravity Models. Does Aggregation Matter?

Contents:

Author Info

  • Agostino, Maria Rosaria
  • Aiello, Francesco
  • Cardamone, Paola

Abstract

There are two sources of bias in the existing gravity equations used to assess the impact of non-reciprocal preferential trade policies (NRPTPs). The main inconsistency comes from the use of aggregate export flows at country level to analyse the effects of trade preferences which, by contrast, apply at product level. The second source of bias is that the literature does not deal with the main econometric issues which are likely to be present when a gravity equation is estimated. This paper discusses the first problem using evidence based on three levels of data aggregation (total exports, total agricultural exports and 2-digit). Furthermore, the estimation methods take into account the unobservable country heterogeneity as well as the endogeneity of trade preferences and the potential selection bias which zero-trade values pose. We consider all NRPTPs granted by 8 major OECD countries to exports from developing countries over the period 1995-2003. We find two key results. First of all we show that the impact of NRPTPs on total exports is positive, whatever the estimator. This means that, other things being equal, the national exports to the preference-giving country of a preferred country are higher than those of a non-preferred country. Secondly, when the analysis is conducted at 2-digit level, it emerges that the preference premium is very high in many 2-digit sectors, whatever the preferential treatment (GSP and/or other preferences). This finding stands in contrast with the result obtained when total exports are considered, which places the preference gain at lower values.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://purl.umn.edu/7294
Download Restriction: no

Bibliographic Info

Paper provided by TRADEAG - Agricultural Trade Agreements in its series Working Papers with number 7294.

as in new window
Length:
Date of creation: 2007
Date of revision:
Handle: RePEc:ags:tragwp:7294

Contact details of provider:
Web page: http://tradeag.vitamib.com/

Related research

Keywords: International Relations/Trade;

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Joseph Francois & Bernard Hoekman & Miriam Manchin, 2006. "Preference Erosion and Multilateral Trade Liberalization," World Bank Economic Review, World Bank Group, vol. 20(2), pages 197-216.
  2. Andrew K. Rose, 2002. "Do We Really Know that the WTO Increases Trade?," NBER Working Papers 9273, National Bureau of Economic Research, Inc.
  3. James E. Anderson & Eric van Wincoop, 2004. "Trade Costs," NBER Working Papers 10480, National Bureau of Economic Research, Inc.
  4. Bruce E. Hansen, 1996. "Sample Splitting and Threshold Estimation," Boston College Working Papers in Economics 319., Boston College Department of Economics, revised 12 May 1998.
  5. Rose, Andrew K, 2003. "Which International Institutions Promote International Trade?," CEPR Discussion Papers 3764, C.E.P.R. Discussion Papers.
  6. Yongcheol Shin & Laura Serlenga, 2004. "Gravity Models of the Intra-EU Trade: Application of the Hausman-Taylor Estimation in Heterogeneous Panels with Common Time-specific Factors," Econometric Society 2004 Far Eastern Meetings 671, Econometric Society.
  7. Elhanan Helpman & Marc Melitz & Yona Rubinstein, 2006. "Trading Partners and Trading Volumes," DEGIT Conference Papers c011_022, DEGIT, Dynamics, Economic Growth, and International Trade.
  8. Shang-Jin Wei & Arvind Subramanian, 2003. "The WTO Promotes Trade, Strongly But Unevenly," IMF Working Papers 03/185, International Monetary Fund.
  9. Ozden, Caglar & Reinhardt, Eric, 2003. "The perversity of preferences : GSP and developing country trade policies, 1976 - 2000," Policy Research Working Paper Series 2955, The World Bank.
  10. Nouve, Kofi & Staatz, John M., 2003. "Has Agoa Increased Agricultural Exports From Sub-Saharan Africa To The United States?," Staff Papers 11573, Michigan State University, Department of Agricultural, Food, and Resource Economics.
  11. Miriam Manchin, 2004. "Preference Utilisation and Tariff Reduction in EU Imports from ACP Countries," Tinbergen Institute Discussion Papers 04-132/2, Tinbergen Institute.
  12. Andrew K. Rose, 2004. "Does the WTO Make Trade More Stable?," NBER Working Papers 10207, National Bureau of Economic Research, Inc.
  13. Laszlo Matyas, 1997. "Proper Econometric Specification of the Gravity Model," The World Economy, Wiley Blackwell, vol. 20(3), pages 363-368, 05.
  14. I-Hui Cheng & Howard J. Wall, 2005. "Controlling for heterogeneity in gravity models of trade and integration," Review, Federal Reserve Bank of St. Louis, issue Jan, pages 49-63.
  15. Peter Egger & Michael Pfaffermayr, 2003. "The proper panel econometric specification of the gravity equation: A three-way model with bilateral interaction effects," Empirical Economics, Springer, vol. 28(3), pages 571-580, July.
  16. Heckman, James J, 1979. "Sample Selection Bias as a Specification Error," Econometrica, Econometric Society, vol. 47(1), pages 153-61, January.
  17. Cardamone, Paola, 2007. "A survey of the assessments of the effectiveness of Preferential Trade Agreements using gravity models," Working Papers 7282, TRADEAG - Agricultural Trade Agreements.
  18. Garcia-Alvarez-Coque, Jose Maria & Martí-Selva, Maria-Luis, 2006. "A Gravity Approach to Assess the Effects of Association Agreements on Euromediterranean Trade of Fruits and Vegetables," MPRA Paper 4124, University Library of Munich, Germany.
  19. Bureau, Jean-Christophe & Chakir, Raja & Gallezot, Jacques, 2006. "The Utilisation of EU and US Trade Preferences for Developing Countries in the Agri-Food Sector," Working Papers 18867, TRADEAG - Agricultural Trade Agreements.
  20. Davidson, Russell & MacKinnon, James G., 1993. "Estimation and Inference in Econometrics," OUP Catalogue, Oxford University Press, number 9780195060119, October.
  21. Rikhil Bhavnani & Natalia T. Tamirisa & Arvind Subramanian & David T. Coe, 2002. "The Missing Globalization Puzzle," IMF Working Papers 02/171, International Monetary Fund.
  22. Hausman, Jerry A. & Taylor, William E., 1981. "Panel data and unobservable individual effects," Journal of Econometrics, Elsevier, vol. 16(1), pages 155-155, May.
  23. Felbermayr, Gabriel, 2006. "Exploring the Intensive and Extensive Margins of World Trade," Munich Reprints in Economics 20646, University of Munich, Department of Economics.
  24. Frankel, Jeffrey & Stein, Ernesto & Wei, Shang-jin, 1995. "Trading blocs and the Americas: The natural, the unnatural, and the super-natural," Journal of Development Economics, Elsevier, vol. 47(1), pages 61-95, June.
  25. Guillaume Gaulier & Sébastien Jean & Deniz Ünal-Kesenci, 2004. "Regionalism and the Regionalisation of International Trade," Working Papers 2004-16, CEPII research center.
  26. Alberto Amurgo Pacheco, 2006. "Preferential Trade Liberalization and the Range of Exported Products: The Case of the Euro-Mediterranean FTA," IHEID Working Papers 18-2006, Economics Section, The Graduate Institute of International Studies.
  27. Lars Nilsson, 2002. "Trading relations: is the roadmap from Lometo Cotonou correct?," Applied Economics, Taylor & Francis Journals, vol. 34(4), pages 439-452.
  28. Baltagi, Badi H. & Egger, Peter & Pfaffermayr, Michael, 2003. "A generalized design for bilateral trade flow models," Economics Letters, Elsevier, vol. 80(3), pages 391-397, September.
  29. Emlinger, Charlotte & Lozza, Emmanuelle Chevassus & Jacquet, Florence, 2006. "EU market access for Mediterranean fruit and vegetables: A gravity model assessment," 98th Seminar, June 29-July 2, 2006, Chania, Crete, Greece 10098, European Association of Agricultural Economists.
  30. Peter Egger, . "An Econometric View on the Estimation of Gravity Models and the Calculation of Trade Potentials," WIFO Working Papers 141, WIFO.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Olper, Alessandro & Raimondi, Valentina, 2002. "Elasticity of trade flow to trade barriers: A comparison among emerging estimation techniques," 2008 International Congress, August 26-29, 2008, Ghent, Belgium 44119, European Association of Agricultural Economists.
  2. Charlotte Emlinger & Florence Jacquet & Emmanuelle Chevassus-Lozza, 2008. "Tariffs and other trade costs: assessing obstacles to Mediterranean countries'access to EU-15 fruit and vegetable markets," Working Papers 26831, Institut National de la Recherche Agronomique, France.
  3. Kavallari, Aikaterini & Maas, Sarah & Schmitz, P. Michael, 2010. "Evidence on Euromediterranean Trade Integration: The Case of German Olive Oil Imports," Journal of International Agricultural Trade and Development, Journal of International Agricultural Trade and Development, vol. 59(1).
  4. Emiliano Magrini & Pierluigi Montalbano & Silvia Nenci, 2013. "Are the EU trade preferences really effective? A Generalized Propensity Score evaluation of the Southern Mediterranean Countries' case in agriculture and fishery," Working Papers 2/13, Sapienza University of Rome, DISS.
  5. Laaksonen, Kalle & Maki-Franti, Petri & Virolainen, Meri, 2007. "Lome Convention, Agriculture and Trade Relations between the EU and the ACP Countries in 1975-2000," Working Papers 18853, TRADEAG - Agricultural Trade Agreements.
  6. Cardamone, Paola, 2007. "A survey of the assessments of the effectiveness of Preferential Trade Agreements using gravity models," Working Papers 7282, TRADEAG - Agricultural Trade Agreements.
  7. Cooke, Edgar F. A., 2012. "Is the impact of AGOA heterogeneous?," MPRA Paper 43277, University Library of Munich, Germany.
  8. Cipollina, Maria & Salvatici, Luca, 2007. "EU and developing countries: an analysis of preferential margins on agricultural trade flows," Working Papers 7219, TRADEAG - Agricultural Trade Agreements.
  9. Cipollina, Maria & Salvatici, Luca, 2006. "Reciprocal Trade Agreements in Gravity Models: A Meta-analysis," Working Papers 18877, TRADEAG - Agricultural Trade Agreements.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:ags:tragwp:7294. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (AgEcon Search).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.