Free Trade Agreements in the Americas: Are the Trade Effects Larger than Anticipated?

31 Pages Posted: 17 Aug 2007

See all articles by Scott L. Baier

Scott L. Baier

Clemson University - John E. Walker Department of Economics

Jeffrey H. Bergstrand

University of Notre Dame

Erika Vidal

Clemson University

Abstract

This paper argues that the 'competitive liberalisation' of national governments of the past several decades reflects national governments' expectations of larger trade impacts from regional economic integration agreements (EIAs) than typical ex ante economic models have suggested. Moreover, we show that previous (typically cross-section) ex post empirical evaluations of the effects of EIAs on trade have seriously over- or underestimated the effects, partly due to ignoring the (endogenous) self-selection bias of country pairs into EIAs. Accounting for this bias, we find that economic integration agreements in the Americas have had much larger impacts on trade over the period 1960-2000 than previously found and the ex post estimates are less fragile than those in earlier cross-section analyses. The results shed further light on understanding the causes and consequences of the growth of regionalism in the world.

Suggested Citation

Baier, Scott Leonard and Bergstrand, Jeffrey H. and Vidal, Erika, Free Trade Agreements in the Americas: Are the Trade Effects Larger than Anticipated?. The World Economy, Vol. 30, No. 9, pp. 1347-1377, September 2007, Available at SSRN: https://ssrn.com/abstract=1007561 or http://dx.doi.org/10.1111/j.1467-9701.2007.01047.x

Scott Leonard Baier (Contact Author)

Clemson University - John E. Walker Department of Economics ( email )

Clemson, SC 29634
United States
864-656-4534 (Phone)

Jeffrey H. Bergstrand

University of Notre Dame ( email )

Mendoza College of Business
Notre Dame, IN 46556
United States
574-631-6761 (Phone)
574-631-5255 (Fax)

HOME PAGE: http://www3.nd.edu/~jbergstr

Erika Vidal

Clemson University ( email )

101 Sikes Ave
Clemson, SC 29634
United States

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