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Terms of Trade and Global Efficiency Effects of Free Trade Agreements, 1990-2002

  • James E. Anderson

    ()

    (Boston College)

  • Yoto V. Yotov

    (Drexel University)

This paper infers the terms of trade effects of Free Trade Agreements (FTAs) with the structural gravity model. Using panel data methods to resolve two way causality between trade and FTAs, we estimate direct FTA effects on bilateral trade volume in 2 digit manufacturing goods from 1990-2002. We deduce the terms of trade changes implied by these volume effects for 40 countries plus a rest-of-the-world aggregate. Some gain over 10%, some lose less than 0.2%. Overall, using a novel measure of the change in iceberg melting, global efficiency rises 0.62%.

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Paper provided by Boston College Department of Economics in its series Boston College Working Papers in Economics with number 780.

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Date of creation: 29 Sep 2011
Date of revision: 11 Oct 2011
Handle: RePEc:boc:bocoec:780
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