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Economic integration agreements and the margins of international trade

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  • Baier, Scott L.
  • Bergstrand, Jeffrey H.
  • Feng, Michael

Abstract

One of the main policy sources of trade–cost changes is the formation of an economic integration agreement (EIA), which potentially affects an importing country's welfare. This paper: (i) provides the first evidence using gravity equations of both intensive and extensive (goods) margins being affected by EIAs employing a panel data set with a large number of country pairs, product categories, and EIAs from 1962 to 2000; (ii) provides the first evidence of the differential (partial) effects of various “types” of EIAs on these intensive and extensive margins of trade; and (iii) finds a novel differential “timing” of the two margins' (partial) effects with intensive-margin effects occurring sooner than extensive-margin effects, consistent with recent theoretical predictions. The results are robust to correcting for potential sample-selection, firm-heterogeneity, and reverse causality biases.

Suggested Citation

  • Baier, Scott L. & Bergstrand, Jeffrey H. & Feng, Michael, 2014. "Economic integration agreements and the margins of international trade," Journal of International Economics, Elsevier, vol. 93(2), pages 339-350.
  • Handle: RePEc:eee:inecon:v:93:y:2014:i:2:p:339-350
    DOI: 10.1016/j.jinteco.2014.03.005
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    References listed on IDEAS

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    More about this item

    Keywords

    Free trade agreements; International trade; Extensive margins; Intensive margins;

    JEL classification:

    • F1 - International Economics - - Trade
    • F15 - International Economics - - Trade - - - Economic Integration

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