IDEAS home Printed from https://ideas.repec.org/p/aim/wpaimx/1430.html

Terms-of-Trade Impacts of Trade Agreements and the Choice of Trade Policy

Author

Listed:
  • Joachim Jarreau

    (Aix-Marseille University (Aix-Marseille School of Economics), CNRS & EHESS)

Abstract

This paper studies the impacts and determinants of trade policy. I use data on applied tariff protection of world countries over 2001-2007 to estimate sector-level trade elasticities. I then calibrate a structural gravity model of world trade. I compute the impacts of trade agreements which were implemented and of those which were not. I find that expected real income gains predict the signing of PTAs. Decomposing these gains shows that domestic mill price increases, reflecting market access gains, have a larger impact than the impact on the consumer price index. I also find that larger expected gains from multilateral liberalization reduce the probability to engage in preferential agreements.

Suggested Citation

  • Joachim Jarreau, 2014. "Terms-of-Trade Impacts of Trade Agreements and the Choice of Trade Policy," AMSE Working Papers 1430, Aix-Marseille School of Economics, France, revised 11 Jul 2014.
    • Handle: RePEc:aim:wpaimx:1430
    as

    Download full text from publisher

    File URL: http://www.amse-aixmarseille.fr/sites/default/files/_dt/2012/wp_2014_-_nr_30.pdf#overlay-context=fr/recherche/documents-de-travail/terms-trade-impacts-trade-agreements-and-choice-trade-policy
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. James E Anderson & Yoto V, 2010. "Specialisation: Pro and Anti-Globalizing 1990-2002," CAGE Online Working Paper Series 15, Competitive Advantage in the Global Economy (CAGE).
    2. Giovanni Maggi & Pinelopi Koujianou Goldberg, 1999. "Protection for Sale: An Empirical Investigation," American Economic Review, American Economic Association, vol. 89(5), pages 1135-1155, December.
    3. Baier, Scott L. & Bergstrand, Jeffrey H., 2009. "Bonus vetus OLS: A simple method for approximating international trade-cost effects using the gravity equation," Journal of International Economics, Elsevier, vol. 77(1), pages 77-85, February.
    4. James E. Anderson & Eric van Wincoop, 2003. "Gravity with Gravitas: A Solution to the Border Puzzle," American Economic Review, American Economic Association, vol. 93(1), pages 170-192, March.
    5. James E. Anderson & Yoto V. Yotov, 2012. "Gold Standard Gravity," Boston College Working Papers in Economics 795, Boston College Department of Economics.
    6. 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.
    7. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
    8. Grossman, Gene M & Helpman, Elhanan, 1995. "The Politics of Free-Trade Agreements," American Economic Review, American Economic Association, vol. 85(4), pages 667-690, September.
    9. Rauch, James E., 1999. "Networks versus markets in international trade," Journal of International Economics, Elsevier, vol. 48(1), pages 7-35, June.
    10. Peter Neary & Monika Mrazova, 2013. "Not so demanding: Preference structure, firm behavior, and welfare," Economics Series Working Papers 691, University of Oxford, Department of Economics.
    11. Costas Arkolakis & Arnaud Costinot & Andres Rodriguez-Clare, 2012. "New Trade Models, Same Old Gains?," American Economic Review, American Economic Association, vol. 102(1), pages 94-130, February.
    12. Baier, Scott L. & Bergstrand, Jeffrey H., 2004. "Economic determinants of free trade agreements," Journal of International Economics, Elsevier, vol. 64(1), pages 29-63, October.
    13. Baldwin, Richard, 1993. "A Domino Theory of Regionalism," CEPR Discussion Papers 857, C.E.P.R. Discussion Papers.
    14. James E. Anderson & Yoto V. Yotov, 2010. "The Changing Incidence of Geography," American Economic Review, American Economic Association, vol. 100(5), pages 2157-2186, December.
    15. Peter Egger & Mario Larch & Kevin E. Staub & Rainer Winkelmann, 2011. "The Trade Effects of Endogenous Preferential Trade Agreements," American Economic Journal: Economic Policy, American Economic Association, vol. 3(3), pages 113-143, August.
    16. Baier, Scott L. & Bergstrand, Jeffrey H., 2007. "Do free trade agreements actually increase members' international trade?," Journal of International Economics, Elsevier, vol. 71(1), pages 72-95, March.
    17. Jean Imbs & Isabelle Mejean, 2015. "Elasticity Optimism," American Economic Journal: Macroeconomics, American Economic Association, vol. 7(3), pages 43-83, July.
    18. Jonathan Eaton & Samuel Kortum, 2002. "Technology, Geography, and Trade," Econometrica, Econometric Society, vol. 70(5), pages 1741-1779, September.
    19. Krugman, Paul R., 1979. "Increasing returns, monopolistic competition, and international trade," Journal of International Economics, Elsevier, vol. 9(4), pages 469-479, November.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Head, Keith & Mayer, Thierry, 2014. "Gravity Equations: Workhorse,Toolkit, and Cookbook," Handbook of International Economics, in: Gopinath, G. & Helpman, . & Rogoff, K. (ed.), Handbook of International Economics, edition 1, volume 4, chapter 0, pages 131-195, Elsevier.
    2. repec:spo:wpecon:info:hdl:2441/dambferfb7dfprc9m01g1j1k2 is not listed on IDEAS
    3. 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.
    4. Bergstrand, Jeffrey H. & Larch, Mario & Yotov, Yoto V., 2015. "Economic integration agreements, border effects, and distance elasticities in the gravity equation," European Economic Review, Elsevier, vol. 78(C), pages 307-327.
    5. Scott L. Baier & Amanda Kerr & Yoto V. Yotov, 2018. "Gravity, distance, and international trade," Chapters, in: Bruce A. Blonigen & Wesley W. Wilson (ed.), Handbook of International Trade and Transportation, chapter 2, pages 15-78, Edward Elgar Publishing.
    6. repec:spo:wpmain:info:hdl:2441/dambferfb7dfprc9m01g1j1k2 is not listed on IDEAS
    7. Yoto V. Yotov, 2024. "The evolution of structural gravity: The workhorse model of trade," Contemporary Economic Policy, Western Economic Association International, vol. 42(4), pages 578-603, October.
    8. Mario Larch & Yoto Yotov, 2017. "On the impact of TTIP in Southeastern and Eastern Europe: A quantitative analysis," Economic Thought journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 3, pages 54-73,74-92.
    9. Inga Heiland, 2017. "Five Essays on International Trade, Factor Flows and the Gains from Globalization," ifo Beiträge zur Wirtschaftsforschung, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 74, July.
    10. 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.
    11. Heid, Benedikt & Larch, Mario, 2016. "Gravity with unemployment," Journal of International Economics, Elsevier, vol. 101(C), pages 70-85.
    12. Lennard Welslau & Raquel Artecona & Daniel E. Perrotti, 2024. "Export competition between China and Latin America and the Caribbean in the United States market," The World Economy, Wiley Blackwell, vol. 47(7), pages 2947-2969, July.
    13. Jacques Simon Song & Hervé William Mougnol A Ekoula, 2025. "Does Financial Integration Contribute to Bilateral Trade in Africa: An Empirical Investigation by the Augmented Gravity Model," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 16(3), pages 12078-12117, September.
    14. Michael Pfaffermayr, 2020. "Constrained Poisson pseudo maximum likelihood estimation of structural gravity models," International Economics, CEPII research center, issue 161, pages 188-198.
    15. Mario Larch & Yoto V. Yotov, 2016. "General Equilibrium Trade Policy Analysis with Structural Gravity," CESifo Working Paper Series 6020, CESifo.
    16. Egger, Peter H. & Nigai, Sergey, 2015. "Structural gravity with dummies only: Constrained ANOVA-type estimation of gravity models," Journal of International Economics, Elsevier, vol. 97(1), pages 86-99.
    17. Peter Egger & Kevin Staub, 2016. "GLM estimation of trade gravity models with fixed effects," Empirical Economics, Springer, vol. 50(1), pages 137-175, February.
    18. Pfaffermayr, Michael & Egger, Peter, 2011. "Structural Estimation of Gravity Models with Path-dependent Market Entry," CEPR Discussion Papers 8458, C.E.P.R. Discussion Papers.
    19. Costinot, Arnaud & Rodríguez-Clare, Andrés, 2014. "Trade Theory with Numbers: Quantifying the Consequences of Globalization," Handbook of International Economics, in: Gopinath, G. & Helpman, . & Rogoff, K. (ed.), Handbook of International Economics, edition 1, volume 4, chapter 0, pages 197-261, Elsevier.
    20. Peter R. Herman, 2022. "Correction to: Modeling complex network patterns in international trade," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 158(2), pages 713-714, May.
    21. James E. Anderson & Mario Larch & Yoto V. Yotov, 2018. "GEPPML: General equilibrium analysis with PPML," The World Economy, Wiley Blackwell, vol. 41(10), pages 2750-2782, October.
    22. Shadat Hossain, 2018. "SAFTA and AFTA: a comparative welfare analysis of two regional trade agreements," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 7(1), pages 1-27, December.

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation: Models and Applications

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:aim:wpaimx:1430. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Gregory Cornu (email available below). General contact details of provider: https://edirc.repec.org/data/amseafr.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.