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Gravity-model Estimation with Time-interval Data: Revisiting the Impact of Free Trade Agreements

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  • Egger, Peter

    (EggerDepartment of Management, Technology and Economics, KOF Swiss Economic Institute)

  • Larch, Mario

    (University of Bayreuth)

  • Yotov, Yoto

    (School of Economics Drexel University LeBow College of Business)

Abstract

We challenge the common practice of estimating gravity equations with time-interval data in order to capture dynamic-adjustment effects to trade-policy changes. Instead, we point to a series of advantages of using consecutive-year data recognizing dynamic-adjustment effects. Our analysis reveals that, relative to time-interval data, the proposed approach avoids downward-biased effect estimates due to the distribution of trade-policy events during an event window as well as due to anticipation (pre-interval) and delayed (post-interval) effects, and it improves the efficiency of effect estimates due to the use of more data.

Suggested Citation

  • Egger, Peter & Larch, Mario & Yotov, Yoto, 2020. "Gravity-model Estimation with Time-interval Data: Revisiting the Impact of Free Trade Agreements," School of Economics Working Paper Series 2020-11, LeBow College of Business, Drexel University.
  • Handle: RePEc:ris:drxlwp:2020_011
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    References listed on IDEAS

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    Cited by:

    1. Miroudot, Sébastien & Rigo, Davide, 2021. "Multinational production and investment provisions in preferential trade agreements," LSE Research Online Documents on Economics 112199, London School of Economics and Political Science, LSE Library.
    2. Dhingra, Swati & Freeman, Rebecca & Huang, Hanwei, 2021. "The impact of non-tariff barriers on trade and welfare," LSE Research Online Documents on Economics 114282, London School of Economics and Political Science, LSE Library.
    3. Julia Grübler & Oliver Reiter & Robert Stehrer, 2021. "On the new gold standard in EU trade integration: reviewing the EU-Japan EPA," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 48(3), pages 611-644, August.
    4. Alen Mulabdic & Lorenzo Rotunno, 2021. "Trade barriers in government procurement," AMSE Working Papers 2122, Aix-Marseille School of Economics, France.
    5. Harald Oberhofer & Michael Pfaffermayr & Yvonne Wolfmayr, 2021. "Die Auswirkungen des Brexit auf Österreichs Wirtschaft," WIFO Studies, WIFO, number 66782.
    6. Ingo Borchert & Mario Larch & Serge Shikher & Yoto V. Yotov, 2022. "Disaggregated gravity: Benchmark estimates and stylized facts from a new database," Review of International Economics, Wiley Blackwell, vol. 30(1), pages 113-136, February.
    7. Silviano Esteve-Pérez & Salvador Gil-Pareja & Rafael Llorca-Vivero & Jordi Paniagua, 2021. "Has the Euro paid off? A study of the trade-induced welfare effects of the EMU," Working Papers 2103, Department of Applied Economics II, Universidad de Valencia.
    8. Freeman, Rebecca & Lewis, John, 2021. "Gravity model estimates of the spatial determinants of trade, migration, and trade-and-migration policies," Economics Letters, Elsevier, vol. 204(C).
    9. Mario Larch & Serge Shikher & Constantinos Syropoulos & Yoto V. Yotov, 2022. "Quantifying the impact of economic sanctions on international trade in the energy and mining sectors," Economic Inquiry, Western Economic Association International, vol. 60(3), pages 1038-1063, July.
    10. Christopher M. Dent, 2021. "Trade, Climate and Energy: A New Study on Climate Action through Free Trade Agreements," Energies, MDPI, vol. 14(14), pages 1-30, July.

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    More about this item

    Keywords

    Structural Gravity; Trade Policy; Free Trade Agreements; Interval Data;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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