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

Author

Listed:
  • 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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    Cited by:

    1. Arne J. Nagengast & Fernando Rios‐Avila & Yoto V. Yotov, 2026. "The European single market and intra‐EU trade: an assessment with heterogeneity‐robust difference‐in‐differences methods," Economica, London School of Economics and Political Science, vol. 93(369), pages 298-331, January.
    2. Peter Egger & Constantinos Syropoulos & Yoto V. Yotov, 2024. "Analyzing the effects of economic sanctions: Recent theory, data, and quantification," Review of International Economics, Wiley Blackwell, vol. 32(1), pages 1-11, February.
    3. Andreas Baur & Lisandra Flach & Xabier Moriana-Armendariz, 2026. "Global Europe 2.0 – The Economic Potential of New EU Trade Agreements in an Era of US Protectionism," EconPol Policy Reports 57, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    4. Lionel Fontagné & Cristina Mitaritonna & Gianluca Orefice & Gianluca Santoni, 2026. "Air Service Agreements, Connectivity and Emissions," Working Papers 2026-04, CEPII research center.
    5. 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.
    6. Lionel Fontagné & Yoto V Yotov, 2026. "Reassessing the benefits of European integration and the European Union's ability to achieve strategic autonomy," Working Papers halshs-05512419, HAL.
    7. Ninon Moreau-Kastler, 2025. "Proportional Treatment Effects in Staggered Settings: An Approach for Poisson Pseudo-Maximum Likelihood," Working Papers 031, EU Tax Observatory.
    8. Carril-Caccia, Federico, 2025. "The impact of economic sanctions on bilateral mergers and acquisitions," European Journal of Political Economy, Elsevier, vol. 86(C).
    9. Ridwan Ah Sheikh & Sunil Kanwar, 2025. "Revisiting the impact of TRIPS on trade: Evidence from staggered difference-in-differences," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2025-025, Indira Gandhi Institute of Development Research, Mumbai, India.
    10. 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.
    11. Chang,Kuo-I & Hayakawa,Kazunobu, 2025. "Subsidies for Reshoring: Evidence from Taiwan," IDE Discussion Papers 974, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    12. Chiara Falco & Valentina Raimondi, 2025. "Hydropower dams, deforestation, and land use change: evidence from Brazil," Working Papers 2025.29, Fondazione Eni Enrico Mattei.
    13. 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).
    14. Yang, Yichen & Zhao, Yu & Liu, Wen, 2025. "Climbing up global value chains: Is the regional trade agreement network stepping stones or stumbling blocks?," Structural Change and Economic Dynamics, Elsevier, vol. 75(C), pages 849-867.
    15. 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.
    16. Cipollina, Maria & Dal Bianco, Silvia, 2025. "Trade sanctions and global value chains: The role of financial development and capital openness in emerging markets," Emerging Markets Review, Elsevier, vol. 67(C).
    17. Hendrik Mahlkow & Sonali Chowdhry & Julian Hinz, 2025. "Diversifizieren, nicht reagieren: Europas neuer Weg in der Handelspolitik," WIFO Research Briefs 5, WIFO.
    18. Korn, Tobias & Stemmler, Henry, 2025. "The persistence of trade relocation from civil conflict," Journal of Development Economics, Elsevier, vol. 172(C).
    19. 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.

    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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