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Expanding RTAs, Trade Flows, and the Multinational Enterprise

  • Michele Fratianni

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

  • Chang Hoon Oh

    (Faculty of Business, Brock University)

We test the relationship between the size of regional trade agreements (RTA) and openness by using a gravity equation with multilateral trade factors. Our sample includes eleven RTAs, seven with constant membership and four with expanding membership. Regional trade bias declines with the size of the club; three of the four expanding RTAs have already surpassed their ‘optimal’ size. We also explore the link between openness of the RTA and the geographic strategy of the multinational enterprise. We find strong evidence in favor of the regionalization strategy, which has been enhanced by the presence of RTAs.

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File URL: http://kelley.iu.edu/riharbau/RePEc/iuk/wpaper/bepp2008-02-fratianni-oh.pdf
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Paper provided by Indiana University, Kelley School of Business, Department of Business Economics and Public Policy in its series Working Papers with number 2008-02.

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Date of creation: Mar 2008
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Handle: RePEc:iuk:wpaper:2008-02
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