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Are all trade agreements equal ? the role of distance in shaping the effect of economic integration agreements on trade flows

Author

Listed:
  • Freeman,Rebecca Ann
  • Pienknagura,Samuel Jaime

Abstract

How does geographic distance affect the impact of trade agreements on bilateral exports, and through what channels? This paper examines this questions in a gravity model context for different types of goods for 185 countries over the period 1965-2010. Three stylized facts emerge. First, although economic integration agreements have a positive impact on trade flows, geographic distance significantly decreases their effect. Second, this phenomenon is in large part explained by the impact of economic integration agreements on distance-sensitive goods, in particular intermediates. These results hold when controlling for trade agreement depth, measured by the type of agreement and content of provisions, and economic similarity among trading partners. Third, this paper finds either no significant effect or a positive interaction between distance and economic integration agreements for final goods, suggesting that trade agreements among countries located far from each other help consumption patterns shift toward the most efficient producers.

Suggested Citation

  • Freeman,Rebecca Ann & Pienknagura,Samuel Jaime, 2016. "Are all trade agreements equal ? the role of distance in shaping the effect of economic integration agreements on trade flows," Policy Research Working Paper Series 7809, The World Bank.
    • Handle: RePEc:wbk:wbrwps:7809
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    Cited by:

    1. Cote, Christine & Estrin, Saul & Shapiro, Daniel, 2020. "Expanding the international trade and investment policy agenda: the role of cities and services," LSE Research Online Documents on Economics 104003, London School of Economics and Political Science, LSE Library.
    2. Kim, Dongin & Steinbach, Sandro & Zurita, Carlos, 2024. "Deep trade agreements and agri-food global value chain integration," Food Policy, Elsevier, vol. 127(C).
    3. Bedassa Tadesse & Roger White, 2019. "Economic integration agreements, immigrants and trade costs," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 155(2), pages 353-406, May.
    4. Hafiz M. Sohail & Mir Zatullah & Zengfu Li, 2021. "Effect of Foreign Direct Investment on Bilateral Trade: Experience From Asian Emerging Economies," SAGE Open, , vol. 11(4), pages 21582440211, October.
    5. Jacopo Timini & Francesca Viani, 2022. "A highway across the Atlantic? Trade and welfare effects of the EU-Mercosur agreement," International Economics, CEPII research center, issue 169, pages 291-308.
    6. Ayman El Dahrawy Sánchez‐Albornoz & Jacopo Timini, 2021. "Trade agreements and Latin American trade (creation and diversion) and welfare," The World Economy, Wiley Blackwell, vol. 44(7), pages 2004-2040, July.
    7. Masood, Amjad, 2021. "Anatomy of the trade-effect of regional trade agreements and agenda for future research," MPRA Paper 108284, University Library of Munich, Germany.
    8. Amjad Masood & Junaid Ahmed & Inmaculada Martínez-Zarzoso, 2022. "Gravity of Covid-19," Economics Bulletin, AccessEcon, vol. 42(1), pages 60-68.
      • Masood, Amjad & Ahmed, Junaid & Martínez-Zarzoso, Inmaculada, 2021. "Gravity of Covid-19," MPRA Paper 109651, University Library of Munich, Germany.
    9. Jason Query & Jon C. Thompson, 2024. "Cultural Distance and International Trade," Open Economies Review, Springer, vol. 35(2), pages 283-300, April.
    10. Wang, Hui & Si, Ieongcheng & Chen, Zhihua, 2024. "Does the Belt and Road Initiative promote China and the countries along the route to reconstruct the global value chain? Evidence from value-added trade," Economic Analysis and Policy, Elsevier, vol. 81(C), pages 63-83.
    11. Timini, Jacopo, 2023. "Revisiting the ‘Cobden-Chevalier network’ trade and welfare effects," Explorations in Economic History, Elsevier, vol. 89(C).
    12. Christine Côté & Saul Estrin & Daniel Shapiro, 0. "Expanding the international trade and investment policy agenda: The role of cities and services," Journal of International Business Policy, Palgrave Macmillan, vol. 0, pages 1-25.
    13. 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).
    14. Erick Kitenge & Sajal Lahiri, 2024. "Estimating gravity coefficients with multiple layers of heterogeneity," Review of International Economics, Wiley Blackwell, vol. 32(3), pages 1204-1237, August.
    15. Chae-Deug Yi, 2022. "The impact of the Japan-European Union Economic Partnership Agreement on the trade and income of Japan, the European Union, and South Korea," Asia Europe Journal, Springer, vol. 20(3), pages 329-356, September.
    16. Christine Côté & Saul Estrin & Daniel Shapiro, 2020. "Expanding the international trade and investment policy agenda: The role of cities and services," Journal of International Business Policy, Palgrave Macmillan, vol. 3(3), pages 199-223, September.

    More about this item

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F15 - International Economics - - Trade - - - Economic Integration

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