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Trade Persistence and the Limits of Trade Agreements

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  • Moelders, Florian
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    Abstract

    International trade ows reveal strong persistence over time. This paper is concerned with the role of trade agreements in this persistent environment. The data reveal a high level of heterogeneity of the trade- creating effect along the trade volume and per-capita income distributions. If controlled for persistence in bilateral trade ows, I find that higher per- capita incomes are associated with smaller increases in bilateral trade ows if an agreement is present, compared to lower-income countries. This gives rise to a re-assessment of trade agreements and hence of economic policy. While they are a powerful tool for trading partners at the lower end of the per-capita income distribution, they are less so at the upper end. --

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    Paper provided by Verein für Socialpolitik, Research Committee Development Economics in its series Proceedings of the German Development Economics Conference, Berlin 2011 with number 58.

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    Date of creation: 2011
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    Handle: RePEc:zbw:gdec11:58

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    Keywords: Trade agreements; Gravity model; Trade persistence;

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