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Evaluating the Trade and Welfare Effects of Developing RTAs

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Author Info
Souleymane COULIBALY

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Abstract

Many recent papers have pointed to ambiguous trade effects of developing regional trade agreements, calling for a reassessment of their economic merits. We focus on six such agreements currently in force in Sub-Saharan Africa, Asia and Latin America, estimating their impacts on trade flows and welfare. We combine a gravity model with kernel and bootstrap estimation techniques so as to capture the non-monotonic trade effects while imposing minimal structure. Instead of the usual dummy variables for RTAs, we propose a new variable, capturing the number of years of a country's RTA membership, and we adapt the framework proposed by Winters (1997) to relate trade effects to their welfare implications. The results indicate that only AFTA and MERCOSUR have induced positive trade and welfare effects. The remaining RTAs have produced mixed effects for their members.

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Publisher Info
Paper provided by Université de Lausanne, Faculté des HEC, DEEP in its series Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) with number 06.03.

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Length: 36 pages
Date of creation: Apr 2006
Date of revision:
Handle: RePEc:lau:crdeep:06.03

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Postal: Université de Lausanne, Faculté des HEC, DEEP, Internef, CH-1015 Lausanne
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Fax: ++41 21 692.33.65
Web page: http://www.hec.unil.ch/deep/publications-english/e-cahiers.htm

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Related research
Keywords: regional trade agreement; kernel regression; bootstrap; welfare;

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Find related papers by JEL classification:
F11 - International Economics - - Trade - - - Neoclassical Models of Trade
F15 - International Economics - - Trade - - - Economic Integration
O50 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - General

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References listed on IDEAS
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    Other versions:
  3. Aitken, Norman D, 1973. "The Effect of the EEC and EFTA on European Trade: A Temporal Cross-Section Analysis," American Economic Review, American Economic Association, vol. 63(5), pages 881-92, December. [Downloadable!] (restricted)
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    Other versions:
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    Other versions:
  6. Ghosh, Sucharita & Yamarik, Steven, 2004. "Are regional trading arrangements trade creating?: An application of extreme bounds analysis," Journal of International Economics, Elsevier, vol. 63(2), pages 369-395, July. [Downloadable!] (restricted)
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  10. Chris Milner & Oliver Morrissey & Andrew McKay, 2005. "Some Simple Analytics of the Trade and Welfare Effects of Economic Partnership Agreements," Journal of African Economies, Oxford University Press, vol. 14(3), pages 327-358, September.
  11. Deardoff, A.V., 1995. "Determinants of Bilateral Trade: Does Gravity Work in a Neoclassical World?," Working Papers 382, Research Seminar in International Economics, University of Michigan.
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  14. Kemp, Murray C. & Wan, Henry Jr., 1976. "An elementary proposition concerning the formation of customs unions," Journal of International Economics, Elsevier, vol. 6(1), pages 95-97, February. [Downloadable!] (restricted)
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  16. Andrew Rose, 2005. "Does the WTO Make Trade More Stable?," Open Economies Review, Springer, vol. 16(1), pages 7-22, January. [Downloadable!] (restricted)
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  17. Philippa Dee & Jyothi Gali, 2003. "The Trade and Investment Effects of Preferential Trading Arrangements," NBER Working Papers 10160, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  18. Winters, L Alan, 1997. "Regionalism and the Rest of the World: The Irrelevance of the Kemp-Wan Theorem," Oxford Economic Papers, Oxford University Press, vol. 49(2), pages 228-34, April. [Downloadable!] (restricted)
  19. Antonio Spilimbergo & Ernesto Stein, 1996. "The Welfare Implications of Trading Blocs among Countries with Different Endowments," NBER Working Papers 5472, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  20. Robert J. R. Elliott & Kengo Ikemoto, 2004. "AFTA and the Asian Crisis: Help or Hindrance to ASEAN Intra-Regional Trade?," Asian Economic Journal, East Asian Economic Association, vol. 18(1), pages 1-23, 03. [Downloadable!] (restricted)
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