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Staggered Difference-in-Differences in Gravity Settings: Revisiting the Effects of Trade Agreements

Author

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  • Arne J. Nagengast
  • Yoto V. Yotov

Abstract

We nest an extended two-way fixed effect (ETWFE) estimator for staggered difference-in-differences within the structural gravity model. To test the ETWFE, we estimate the effects of regional trade agreements (RTAs). The results suggest that RTA estimates in the current gravity literature may be biased downward (by more than 50 percent in our sample). Sensitivity analyses confirm the robustness of our main findings and demonstrate the applicability of our methods across settings. We expect the ETWFE methods to have significant implications for estimates of other policy variables in the trade literature and for gravity regressions on migration and foreign direct investment.

Suggested Citation

  • Arne J. Nagengast & Yoto V. Yotov, 2025. "Staggered Difference-in-Differences in Gravity Settings: Revisiting the Effects of Trade Agreements," American Economic Journal: Applied Economics, American Economic Association, vol. 17(1), pages 271-296, January.
    • Handle: RePEc:aea:aejapp:v:17:y:2025:i:1:p:271-96
    DOI: 10.1257/app.20230089
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    References listed on IDEAS

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    1. Clément de Chaisemartin & Xavier D'Haultfœuille, 2020. "Two-Way Fixed Effects Estimators with Heterogeneous Treatment Effects," American Economic Review, American Economic Association, vol. 110(9), pages 2964-2996, September.
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    Cited by:

    1. Ridwan Ah Sheikh & Sunil Kanwar, 2024. "Revisiting the Impact of TRIPS on IPR-intensive Export Flows: Evidence from Staggered Difference-in-Differences," Working papers 351, Centre for Development Economics, Delhi School of Economics.
    2. Korn, Tobias & Stemmler, Henry, 2025. "The persistence of trade relocation from civil conflict," Journal of Development Economics, Elsevier, vol. 172(C).
    3. Nagengast, Arne & Rios-Avila, Fernando & Yotov, Yoto, 2024. "The European Single Market and Intra-EU Trade: An Assessment with Heterogeneity-Robust Difference-in-Differences Methods," School of Economics Working Paper Series 2024-5, LeBow College of Business, Drexel University, revised 06 May 2024.
    4. Lukas J. Hornung & Nico Stöckmann, 2024. "Protectionism in Disguise? EU Anti-Dumping Measures Targeting PRC Iron and Steel Products," Journal of Industry, Competition and Trade, Springer, vol. 24(1), pages 1-31, December.
    5. Hendrik Mahlkow & Sonali Chowdhry & Julian Hinz, 2025. "Diversifizieren, nicht reagieren: Europas neuer Weg in der Handelspolitik," WIFO Research Briefs 5, WIFO.
    6. Konstantin Sommer, 2024. "The Chinese waste import ban and the emergence of waste havens within Europe," Tinbergen Institute Discussion Papers 24-053/VI, Tinbergen Institute.
    7. Elisabeth Christen & Gabriel Felbermayr & Hendrik Mahlkow & Joschka Wanner & Martin Mosler & Christoph A. Schaltegger, 2025. "Freihandel, anyone?. Effekte handelspolitischer Szenarien zwischen der Schweiz und den USA," WIFO Studies, WIFO, number 57956826, March.
    8. Bruno, Randolph Luca & Cipollina, Maria & Dal Bianco, Silvia, 2025. "Trade sanctions and Global Value Chains: A China–South Africa perspective," China Economic Review, Elsevier, vol. 89(C).

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    More about this item

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • J82 - Labor and Demographic Economics - - Labor Standards - - - Labor Force Composition

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