Do Customs Union Members Engage in More Bilateral Trade than Free-Trade Agreement Members?
This paper provides the first empirical analysis directly comparing the effects of customs unions (CUs) and free-trade agreements (FTAs) on members' bilateral trade, while addressing the biases arising from log-linearization of the gravity model and crucial time-invariant unobservables. Since Fiorentino et al. (2007 ) question the popularity of CUs relative to FTAs, considering the latter to be more practical in the current trading climate, such a comparison seems especially relevant. While Baier and Bergstrand (2007 ) find an FTA to approximately double members' bilateral trade after 10 years, the results of this paper find CUs to have had a much larger impact than FTAs. Copyright © 2010 Blackwell Publishing Ltd.
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Volume (Year): 18 (2010)
Issue (Month): 4 (09)
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