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Revisiting the Effects of Regional Trading Agreements on trade flows with Proper Specification of the Gravity Model

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Author Info

  • Céline CARRERE

    ()
    (Centre d'Etudes et de Recherches sur le Développement International)

Abstract

This paper uses a gravity model to assess ex-post regional trade agreements. The model includes 130 countries and is estimated with panel data over the period 1962-1996. The introduction of the correct number of dummy variables allows for identification of Vinerian trade creation and trade diversion effects, while the estimation method takes into account a potential correlation between some of the explanatory variables and the bilateral specific effects introduced in the model, as well as a potential selection bias. In contrast to previous estimates in cross-section, results show that regional agreements have generated a significant increase in trade between members, often at the expense of the rest of the world.

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Bibliographic Info

Paper provided by CERDI in its series Working Papers with number 200310.

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Length: 27
Date of creation: 2003
Date of revision:
Publication status: Published in European Economic Review, 2006, pages 223-247
Handle: RePEc:cdi:wpaper:423

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Related research

Keywords: panel data.; Trade diversion; Trade creation; Gravity equation; Regional trade agreements;

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Cited by:
  1. Pedro J. Martinez Edo, 2011. "Reciprocal liberalization: Bilateral, plurilateral or multilateral?," STUDIES IN TRADE AND INVESTMENT, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP), United Nations Economic and Social Commission for Asia and the Pacific (ESCAP).
  2. Amélie Guillin, 2012. "The impacts of Regional Trade Agreements in force in Europe on trade in services," Economics Bulletin, AccessEcon, vol. 32(1), pages 685-697.
  3. Christophe Rault & Robert Sova & Ana Maria Sova, 2009. "Modelling international trade flows between CEEC and OECD countries," Applied Economics Letters, Taylor & Francis Journals, vol. 16(15), pages 1547-1554.
  4. Martin, Philippe & Mayer, Thierry & Thoenig, Mathias, 2010. "The geography of conflicts and free trade agreements," CEPR Discussion Papers, C.E.P.R. Discussion Papers 7740, C.E.P.R. Discussion Papers.
  5. Arcand, Jean-Louis & Olarreaga, Marcelo & Zoratto, Laura, 2011. "Weak Governments and Trade Agreements," CEPR Discussion Papers, C.E.P.R. Discussion Papers 8595, C.E.P.R. Discussion Papers.
  6. Guglielmo Caporale & Christophe Rault & Robert Sova & Anamaria Sova, 2009. "On the bilateral trade effects of free trade agreements between the EU-15 and the CEEC-4 countries," Review of World Economics (Weltwirtschaftliches Archiv), Springer, Springer, vol. 145(3), pages 573-573, October.
  7. Robert SOVA & Ion STANCU & Laurentiu FRATILA & Anamaria SOVA, 2011. "Corporate Social Responsibility and its Macroeconomic Implications," REVISTA DE MANAGEMENT COMPARAT INTERNATIONAL/REVIEW OF INTERNATIONAL COMPARATIVE MANAGEMENT, Faculty of Management, Academy of Economic Studies, Bucharest, Romania, Faculty of Management, Academy of Economic Studies, Bucharest, Romania, vol. 12(1), pages 172-183, March.
  8. Shingal, ANIRUDH, 2009. "How much do agreements matter for services trade?," MPRA Paper 32815, University Library of Munich, Germany, revised 15 May 2010.
  9. Llanto, Gilberto M. & Quimba, Francis Mark A. & Sombilla, Mercedita A., 2012. "Interregional Trade of High-value Fruits and Vegetables: Issues on Transport and Shipping," Discussion Papers DP 2012-08, Philippine Institute for Development Studies.
  10. Guglielmo Maria Caporale & Christophe Rault & Robert Sova & Anamaria Sova, 2009. "Trade Specialisation and Economic Convergence: Evidence from Two Eastern European Countries," Discussion Papers of DIW Berlin 875, DIW Berlin, German Institute for Economic Research.
  11. Kurmanalieva, Elvira & Vinokurov, Evgeny, 2011. "Holding together or falling apart:Results of gravity equation of the CIS trade," MPRA Paper 32003, University Library of Munich, Germany.
  12. 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, 04.
  13. Rault, Christophe & Sova, Robert & Sova, Anamaria, 2007. "The Role of Association Agreements within European Union Enlargement to Central and Eastern European Countries," IZA Discussion Papers 2769, Institute for the Study of Labor (IZA).
  14. Sova, Robert & Sova, Anamaria, 2007. "A fast, easy, and efficient estimator for the trade flux between heterogeneous economies," MPRA Paper 3457, University Library of Munich, Germany.
  15. URATA Shujiro & OKABE Misa, 2007. "The Impacts of Free Trade Agreements on Trade Flows: An Application of the Gravity Model Approach," Discussion papers, Research Institute of Economy, Trade and Industry (RIETI) 07052, Research Institute of Economy, Trade and Industry (RIETI).

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