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Determinants of regional integration agreements in a discrete choice framework: Re-Examining the evidence

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  • Celestino Suárez-Burgnet
  • Inmaculada Martínez-Zarzoso
  • Laura Márquez-Ramos

Abstract

This paper provides new empirical evidence on the determinants of regional integration agreements (RIAs) in a discrete choice modelling framework. The research has two main aims: first, to empirically analyse the determinants of different levels of integration, re-examining the evidence presented by Baier and Bergstrand (2004) in the JIE 64 (1); and second, to analyse the importance of additional factors, in particular socio-political factors. The results show that geographical factors alone are the most important explanatory factors for the probability of regional integration agreement formation or enhancement, thus supporting the theories on "natural" trading partners. The socio-political factors considered, democracy dummy, the level of economic freedom and the common language dummy are all statistically significant, although their relative importance in explaining RIA formation is low.

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Paper provided by FEDEA in its series Working Papers on International Economics and Finance with number 05-10.

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Handle: RePEc:fda:fdadef:05-10

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  1. Scott L. Baier & Jeffrey H. Bergstrand, 2005. "Do free trade agreements actually increase members’ international trade?," Working Paper, Federal Reserve Bank of Atlanta 2005-03, Federal Reserve Bank of Atlanta.
  2. Jeffrey A. Frankel & Ernesto Stein & Shang-Jin Wei, 1993. "Continental Trading Blocs: Are They Natural, or Super-Natural?," NBER Working Papers 4588, National Bureau of Economic Research, Inc.
  3. Koppelman, Frank S. & Wen, Chieh-Hua, 1998. "Alternative nested logit models: structure, properties and estimation," Transportation Research Part B: Methodological, Elsevier, Elsevier, vol. 32(5), pages 289-298, June.
  4. Frankel, Jeffrey A & Stein, Ernesto & Wei, Shang-Jin, 1996. "Regional Trading Arrangements: Natural or Supernatural," American Economic Review, American Economic Association, American Economic Association, vol. 86(2), pages 52-56, May.
  5. Magee Christopher S, 2003. "Endogenous Preferential Trade Agreements: An Empirical Analysis," The B.E. Journal of Economic Analysis & Policy, De Gruyter, De Gruyter, vol. 2(1), pages 1-19, December.
  6. Frankel, Jeffrey A. & Stein, Ernesto & Wei, Shang-Jin, 1996. "Regional Trading Arrangements," Center for International and Development Economics Research, Working Paper Series, Center for International and Development Economics Research, Institute for Business and Economic Research, UC Berkele qt5hf1z4rv, Center for International and Development Economics Research, Institute for Business and Economic Research, UC Berkeley.
  7. Daniel McFadden & Kenneth Train, 2000. "Mixed MNL models for discrete response," Journal of Applied Econometrics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 15(5), pages 447-470.
  8. Baier, Scott L. & Bergstrand, Jeffrey H., 2004. "Economic determinants of free trade agreements," Journal of International Economics, Elsevier, Elsevier, vol. 64(1), pages 29-63, October.
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