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Interdependent preferential trade agreement memberships: An empirical analysis

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  • Egger, Peter
  • Larch, Mario

Abstract

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.

Suggested Citation

  • Egger, Peter & Larch, Mario, 2008. "Interdependent preferential trade agreement memberships: An empirical analysis," Journal of International Economics, Elsevier, vol. 76(2), pages 384-399, December.
  • Handle: RePEc:eee:inecon:v:76:y:2008:i:2:p:384-399
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    More about this item

    Keywords

    Preferential trade agreements Probit model Spatial econometrics F15 C11 C15 C25;

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities

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