Heterogeneous Effects of Preferential Trade Agreements: How does Partner Similarity Matter?

Juyoung Cheong (), Do Won Kwak () and Kam Ki Tang

World Development, 2015, vol. 66, issue C, 222-236

Abstract: This paper examines how dissimilarity of partner country characteristics affects the change in trade flows under a preferential trade agreement (PTA). Our results show that the more similar the partner countries are, the larger the increase in intra-bloc trade is under a PTA. Particularly, there is a substantial “development neighborhood premium”: the gain for developing countries from a PTA among themselves is about two and a half times that from partnering with industrial countries. Our findings challenge the perception that by becoming more integrated with industrial countries, developing countries could automatically gain access to a much larger and lucrative export market.

Keywords: preferential trade agreements; trade creation; gravity model; heterogeneity; similarity (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (33)

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Working Paper: Heterogeneous effects of preferential trade agreements: How does partner similarity matter? (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:wdevel:v:66:y:2015:i:c:p:222-236

DOI: 10.1016/j.worlddev.2014.08.021

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