Evaluating the Trade and Welfare Effects of Developing RTAs

Evaluating the Trade and Welfare Effects of Developing RTAs

Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) from Université de Lausanne, Faculté des HEC, DEEP

Abstract: Many recent papers have pointed to ambiguous trade effects of developing regional trade agreements, calling for a reassessment of their economic merits. We focus on six such agreements currently in force in Sub-Saharan Africa, Asia and Latin America, estimating their impacts on trade flows and welfare. We combine a gravity model with kernel and bootstrap estimation techniques so as to capture the non-monotonic trade effects while imposing minimal structure. Instead of the usual dummy variables for RTAs, we propose a new variable, capturing the number of years of a country's RTA membership, and we adapt the framework proposed by Winters (1997) to relate trade effects to their welfare implications. The results indicate that only AFTA and MERCOSUR have induced positive trade and welfare effects. The remaining RTAs have produced mixed effects for their members.

Keywords: regional trade agreement; kernel regression; bootstrap; welfare (search for similar items in EconPapers)
JEL-codes: F11 F15 O50 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-afr, nep-int and nep-sea
Date: 2006-04
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Persistent link: http://EconPapers.repec.org/RePEc:lau:crdeep:06.03

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