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Terms of trade and global efficiency effects of free trade agreements, 1990–2002

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  • Anderson, James E.
  • Yotov, Yoto V.

Abstract

This paper infers the terms of trade effects of free trade agreements (FTAs) implemented in the 1990s. We estimate large FTA effects on bilateral trade volume in 2 digit manufacturing goods from 1990–2002, using panel data gravity methods to resolve two way causality. The terms of trade changes implied by these volume effects are deduced for 40 countries plus a rest-of-the-world aggregate using an endowments general equilibrium model. Some countries gain over 5% of real manufacturing income, some lose less than 0.3%. Global efficiency of manufactures trade rises 0.9% based on a distance function measure of iceberg melting.

Suggested Citation

  • Anderson, James E. & Yotov, Yoto V., 2016. "Terms of trade and global efficiency effects of free trade agreements, 1990–2002," Journal of International Economics, Elsevier, vol. 99(C), pages 279-298.
  • Handle: RePEc:eee:inecon:v:99:y:2016:i:c:p:279-298
    DOI: 10.1016/j.jinteco.2015.10.006
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    More about this item

    Keywords

    Free trade agreements; Gravity; Terms of Trade; Distance Function;

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions

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