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Size of Regional Trade Agreements and Regional Trade Bias

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  • Michele Fratianni

    (Department of Business Economics and Public Policy, Indiana University Kelley School of Business)

  • Chang Hoon Oh

    (Department of Business Economics and Public Policy, Indiana University Kelley School of Business)

Abstract

We test the relationship between size of regional trade agreement (RTA) and regional trade bias using a gravity equation on a large sample of 143 countries for the period 1980-2003. We find that regional trade bias declines with the size of the club and that three of the four expanding RTAs have already surpassed their ‘optimal’ sizes. There is no evidence that RTAs have set protection levels against outsiders noncooperatively.

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File URL: http://www.bus.indiana.edu/riharbau/RePEc/iuk/wpaper/bepp2007-01-fratianni-oh.pdf
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Bibliographic Info

Paper provided by Indiana University, Kelley School of Business, Department of Business Economics and Public Policy in its series Working Papers with number 2007-01.

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Date of creation: Jan 2007
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Handle: RePEc:iuk:wpaper:2007-01

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Keywords: RTA; regional trade bias; trade flows;

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  1. Fratianni, Michele & Kang, Heejoon, 2006. "Heterogeneous distance-elasticities in trade gravity models," Economics Letters, Elsevier, vol. 90(1), pages 68-71, January.
  2. Anderson, James E, 1979. "A Theoretical Foundation for the Gravity Equation," American Economic Review, American Economic Association, vol. 69(1), pages 106-16, March.
  3. de Melo, Jaime & Montenegro, Claudio & Panagariya, Arvind, 1992. "Regional integration, old and new," Policy Research Working Paper Series 985, The World Bank.
  4. Arvind Panagariya, 2000. "Preferential Trade Liberalization: The Traditional Theory and New Developments," Journal of Economic Literature, American Economic Association, vol. 38(2), pages 287-331, June.
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