The dark side of the generalized system of preferences
AbstractThe Generalized System of Preferences (GSP) was established to promote the exports of low-income countries to industrialized countries in order to support their economic growth and development. However, the design of these schemes is rather complex and the e�ects of GSP have been found to be controversial. While previous studies solely analyzed preferential agreements of individual granting countries separately, implying a one-sided perspective, we take a general view and investigate the overall and dynamic e�ects common to the various GSP schemes in order to provide generalized recommendations for economic policy. In our empirical analysis, based on an extensive dataset covering most of world trade, we �nd that GSP tends to foster developing countries�exports in the short-run, but hampers them in the long-run. Also, GSP granting countries are able to promote their own exports initially, while in the long-run their exports decrease. Economically advanced GSP recipients 1 are more likely to bene�t from GSP than less advanced countries. Taken together, GSP does not seem to be a suitable instrument to promote sustainable economic growth and development of low-income countries. --
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Bibliographic InfoPaper provided by German Council of Economic Experts / Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichen Entwicklung in its series Working Papers with number 02/2010.
Date of creation: 2010
Date of revision:
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More information through EDIRC
GATT; WTO; GSP; trade; gravity model; regression;
Other versions of this item:
- Bernhard Herz & Marco Wagner, 2011. "The Dark Side of the Generalized System of Preferences," Review of International Economics, Wiley Blackwell, vol. 19(4), pages 763-775, 09.
- C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
- F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
- F55 - International Economics - - International Relations, National Security, and International Political Economy - - - International Institutional Arrangements
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