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The Impact of Preferential Trade Agreements on the Margins of International Trade

Author

Listed:
  • Neil Foster-McGregor

    (The Vienna Institute for International Economic Studies, wiiw)

  • Johannes Pöschl
  • Robert Stehrer

    (The Vienna Institute for International Economic Studies, wiiw)

Abstract

In this paper we consider the trade creating effects of Preferential Trade Agreements (PTAs) for a large sample of countries over the period 1960-2000. The paper builds upon the existing literature by examining whether any significant effects of PTAs occur through a change in the variety of exports (i.e. the extensive margin) or through a change in the volume of existing products (the intensive margin). To address this issue we employ the commonly used gravity equation as well as a matching approach to deal with potential self-selection problems. Our results indicate that exports respond positively to the formation of a PTA between countries, and that much of this increase in exports occurs along the extensive margin. We also show that the gains are strongest for larger trading partners, with again much of the benefits occurring along the extensive margin.

Suggested Citation

  • Neil Foster-McGregor & Johannes Pöschl & Robert Stehrer, 2010. "The Impact of Preferential Trade Agreements on the Margins of International Trade," wiiw Working Papers 70, The Vienna Institute for International Economic Studies, wiiw.
  • Handle: RePEc:wii:wpaper:70
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    More about this item

    Keywords

    preferential trade agreements; intensive and extensive margin; matching; difference-in-difference;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F15 - International Economics - - Trade - - - Economic Integration

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    This paper has been announced in the following NEP Reports:

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