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Disaggregating PTAs at the Role of International Division of Labor on PTA Formation

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  • Hazel Parcon

    (Department of Economics, University of Hawaii at Manoa)

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    Abstract

    This paper shows that additional insights on PTA formation can be gained from separating North-South, North-North, and South-South country pairs. Inter-industry trade is mostly significant for all country pairs and intra-industry trade has a positive impact only for North-South and North-North country pairs. Controlling for geographical proximity, countries choose PTA partners with which they have a history of trading. Using a simple model, this paper demonstrates that trade protection is not the necessary outcome with international product fragmentation. Empirical findings support the hypothesis that international division of labor has influenced the formation of North- South PTAs.

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    File URL: http://www.economics.hawaii.edu/research/workingpapers/WP_08-6.pdf
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    Bibliographic Info

    Paper provided by University of Hawaii at Manoa, Department of Economics in its series Working Papers with number 200806.

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    Length: 63
    Date of creation: 01 Oct 2008
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    Handle: RePEc:hai:wpaper:200806

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    Keywords: preferential trading agreements; product fragmentation; trade policy;

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