Revisiting the Effects of Regional Trading Agreements on trade flows with Proper Specification of the Gravity Model
This paper uses a gravity model to assess ex-post regional trade agreements. The model includes 130 countries and is estimated with panel data over the period 1962-1996. The introduction of the correct number of dummy variables allows for identification of Vinerian trade creation and trade diversion effects, while the estimation method takes into account a potential correlation between some of the explanatory variables and the bilateral specific effects introduced in the model, as well as a potential selection bias. In contrast to previous estimates in cross-section, results show that regional agreements have generated a significant increase in trade between members, often at the expense of the rest of the world.
|Date of creation:||2003|
|Date of revision:|
|Publication status:||Published in European Economic Review, 2006, pages 223-247|
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