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Economic integration agreements and the margins of international trade

Listed author(s):
  • Baier, Scott L.
  • Bergstrand, Jeffrey H.
  • Feng, Michael

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.

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File URL: http://www.sciencedirect.com/science/article/pii/S0022199614000506
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Article provided by Elsevier in its journal Journal of International Economics.

Volume (Year): 93 (2014)
Issue (Month): 2 ()
Pages: 339-350

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Handle: RePEc:eee:inecon:v:93:y:2014:i:2:p:339-350
DOI: 10.1016/j.jinteco.2014.03.005
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505552

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