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Interdependent preferential trade agreement memberships: An empirical analysis

  • Egger, Peter
  • Larch, Mario

The establishment of a new preferential trade agreement (PTA) or the expansion of an existing one alters the incentives of non-members to participate in a PTA. This can lead to a domino effect whereby non-members join an existing PTA. Or it can lead a pair of countries to establish a new PTA. We examine the determinants of why a pair of countries enters a bilateral PTA. Our emphasis is on (a) the impact of pre-existing PTAs and (b) whether this impact is larger when the members of pre-existing PTAs are on average geographically close to the pair of countries. Using data for 145 countries during 1955-2005, we find evidence that pre-existing PTAs increase the probability that a country-pair will enter a bilateral PTA and that this effect diminishes with distance. The analysis makes use of techniques drawn from spatial econometrics.

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Article provided by Elsevier in its journal Journal of International Economics.

Volume (Year): 76 (2008)
Issue (Month): 2 (December)
Pages: 384-399

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Handle: RePEc:eee:inecon:v:76:y:2008:i:2:p:384-399
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505552

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