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Size of Regional Trade Agreements and Regional Trade Bias

Author

Listed:
  • Michele Fratianni

    (Department of Business Economics and Public Policy, Indiana University Kelley School of Business)

  • Chang Hoon Oh

    (Department of Business Economics and Public Policy, Indiana University Kelley School of Business)

Abstract

We test the relationship between size of regional trade agreement (RTA) and regional trade bias using a gravity equation on a large sample of 143 countries for the period 1980-2003. We find that regional trade bias declines with the size of the club and that three of the four expanding RTAs have already surpassed their ‘optimal’ sizes. There is no evidence that RTAs have set protection levels against outsiders noncooperatively.

Suggested Citation

  • Michele Fratianni & Chang Hoon Oh, 2007. "Size of Regional Trade Agreements and Regional Trade Bias," Working Papers 2007-01, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
  • Handle: RePEc:iuk:wpaper:2007-01
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    File URL: http://kelley.iu.edu/riharbau/RePEc/iuk/wpaper/bepp2007-01-fratianni-oh.pdf
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    References listed on IDEAS

    as
    1. Jeffrey A. Frankel, 1998. "The Regionalization of the World Economy," NBER Books, National Bureau of Economic Research, Inc, number fran98-1.
    2. Shang-Jin Wei & Jeffrey A. Frankel, 1998. "Open Regionalism in a World of Continental Trade Blocs," IMF Staff Papers, Palgrave Macmillan, vol. 45(3), pages 440-453, September.
    3. Jeffrey A. Frankel, 1998. "Introduction to "Regionalization of the World Economy, The"," NBER Chapters,in: The Regionalization of the World Economy, pages 1-6 National Bureau of Economic Research, Inc.
    4. Fratianni, Michele & Kang, Heejoon, 2006. "Heterogeneous distance-elasticities in trade gravity models," Economics Letters, Elsevier, vol. 90(1), pages 68-71, January.
    5. Alan Deardorff, 1998. "Determinants of Bilateral Trade: Does Gravity Work in a Neoclassical World?," NBER Chapters,in: The Regionalization of the World Economy, pages 7-32 National Bureau of Economic Research, Inc.
    6. de Melo, Jaime & Montenegro, Claudio & Panagariya, Arvind, 1992. "Regional integration, old and new," Policy Research Working Paper Series 985, The World Bank.
    7. Andriamananjara, Soamiely, 1999. "On the size and number of regional integration arrangements - a political economy model," Policy Research Working Paper Series 2117, The World Bank.
    8. Arvind Panagariya, 2000. "Preferential Trade Liberalization: The Traditional Theory and New Developments," Journal of Economic Literature, American Economic Association, vol. 38(2), pages 287-331, June.
    9. Anderson, James E, 1979. "A Theoretical Foundation for the Gravity Equation," American Economic Review, American Economic Association, vol. 69(1), pages 106-116, March.
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    More about this item

    Keywords

    RTA; regional trade bias; trade flows;

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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