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

Posted: 1 Aug 2011

See all articles by Neil Foster-McGregor

Neil Foster-McGregor

UNU-MERIT

Johannes Poeschl

affiliation not provided to SSRN

Robert Stehrer

Vienna Institute of International Economic Studies (WIIW)

Date Written: 2011

Abstract

In this paper we consider the trade creating effects of Preferential Trade Agreements (PTAs) for a large sample of countries within the period 1962-2000. The paper builds upon existing literature by examining whether any significant effects of PTAs occur through a change in the variety of exports (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 extensive margin responds more strongly to the formation of a PTA in larger exporters and for larger country pairs.

Keywords: Preferential trade agreements, Intensive and extensive margin, Matching econometrics, Difference-in-difference

JEL Classification: F10, F15

Suggested Citation

Foster-McGregor, Neil and Poeschl, Johannes and Stehrer, Robert, The Impact of Preferential Trade Agreements on the Margins of International Trade (2011). Economic Systems, Vol. 35, No. 1, 2011, Available at SSRN: https://ssrn.com/abstract=1899646

Neil Foster-McGregor (Contact Author)

UNU-MERIT ( email )

Keizer Karelplein 19
Maastricht, 6211TC
Netherlands

Johannes Poeschl

affiliation not provided to SSRN ( email )

Robert Stehrer

Vienna Institute of International Economic Studies (WIIW) ( email )

A-1010 Vienna
Austria

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