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Preferential trading agreements and the gravity model in presence of zero and missing trade flows: Early results for China and India

Author

Listed:
  • Rahul Sen

    () (Department of Economics, Faculty of Business and Law, Auckland University of Technology)

  • Sadhana Srivastava

    () (Department of Economics, Faculty of Business and Law, Auckland University of Technology)

  • Don Webber

    (Department of Accountancy, Economics and Finance, University of the West of England, Bristol, UK)

Abstract

The two most populous countries of the world have embarked upon an extensive array of preferential trading agreements in recent decades. This paper specifically investigates the impacts on trade creation and trade diversion of China’s and India’s 11 major preferential trade agreements using an augmented gravity model that takes into account zero and missing trade flows in the data, employing a Zero Inflated Negative Binomial (ZINB) regression model as suggested in the recent literature by Burger et.al (2009) and Kohl (2012). The early results for the ZINB model, provided only for India and China as the home country, confirms that Chinese exports and imports were more likely to be net trade creating in presence of PTAs while India’s exports were more likely to be net trade diverting in the presence of the same PTAs, with imports having an insignificant effect. For India and China so far, most ASEAN+6 PTAs seems to have created both intra-bloc and extra-bloc trade. APTA is observed to be the only significant export creating PTA for India, while APTA and ACFTA are both found to be export creating for China.

Suggested Citation

  • Rahul Sen & Sadhana Srivastava & Don Webber, 2015. "Preferential trading agreements and the gravity model in presence of zero and missing trade flows: Early results for China and India," Working Papers 2015-02, Auckland University of Technology, Department of Economics.
  • Handle: RePEc:aut:wpaper:201502
    as

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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Trade creation; Trade diversion; Distance; Trade agreements;

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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