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The impact of Preferential Trade Agreements on the margins of international trade

  • Foster, Neil
  • Poeschl, Johannes
  • Stehrer, Robert

In this paper we consider the trade creating effects of Preferential Trade Agreements (PTAs) for a large sample of countries within the period 1962-2000. The paper builds upon existing literature by examining whether any significant effects of PTAs occur through a change in the variety of exports (the extensive margin) or through a change in the volume of existing products (the intensive margin). To address this issue we employ the commonly used gravity equation as well as a matching approach to deal with potential self-selection problems. Our results indicate that exports respond positively to the formation of a PTA between countries, and that much of this increase in exports occurs along the extensive margin. We also show that the extensive margin responds more strongly to the formation of a PTA in larger exporters and for larger country pairs.

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Article provided by Elsevier in its journal Economic Systems.

Volume (Year): 35 (2011)
Issue (Month): 1 (March)
Pages: 84-97

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Handle: RePEc:eee:ecosys:v:35:y:2011:i:1:p:84-97
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