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FTA and Economic Growth: A Nonparametric Approach

Author

Listed:
  • Jung Hur

    () (Sogang University)

  • Cheolbeom Park

    () (Korea University)

Abstract

This paper assesses whether a bilateral FTA exerts a positive growth effect of the economies of the two countries engaging in the FTA. It employs a nonparametric matching approach, which is more faithful to questions posed by trade theories, imposes no specific functional froms on the relation, and can be applied to a broad range of data structures. Unlike the results from earlier linear regression model approaches, we find an insignificant effect of the FTA on total economic growth. In particular, we demonstrate that an FTA exerts no significant growth effects in the one-to-10-year period after its launch. Furthermore, we detect an upward trend in the gap between the growth rates of per capita real GDP within a bilateral FTA. This implies uneven FTA effects across within an FTA, which may explain, in part, the insignificant effects of the FTA on the total economic growth.

Suggested Citation

  • Jung Hur & Cheolbeom Park, 2010. "FTA and Economic Growth: A Nonparametric Approach," Discussion Paper Series 1009, Institute of Economic Research, Korea University.
  • Handle: RePEc:iek:wpaper:1009
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    File URL: http://econ.korea.ac.kr/~ri/WorkingPapers/w1009.pdf
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    References listed on IDEAS

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    3. Dani Rodrik & Arvind Subramanian & Francesco Trebbi, 2004. "Institutions Rule: The Primacy of Institutions Over Geography and Integration in Economic Development," Journal of Economic Growth, Springer, vol. 9(2), pages 131-165, June.
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    7. Edwin Leuven & Barbara Sianesi, 2003. "PSMATCH2: Stata module to perform full Mahalanobis and propensity score matching, common support graphing, and covariate imbalance testing," Statistical Software Components S432001, Boston College Department of Economics, revised 01 Feb 2018.
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    Cited by:

    1. Chen, Li-Ju & Hu, Shih-Wen & Wang, Vey & Wen, Jiandong & Ye, Chusheng, 2014. "The effects of purchasing and price subsidy policies for agricultural products under target zones," Economic Modelling, Elsevier, vol. 43(C), pages 439-447.

    More about this item

    Keywords

    Free trade agreement; Growth; Matching; Treatment effect;

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • O24 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models

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