Trade efficiency under FTA for Thailand’s agricultural exports: copula-based gravity stochastic frontier model

Arisara Romyen (), Chonrada Nunti () and Paramin Neranon ()
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Arisara Romyen: Prince of Songkla University
Chonrada Nunti: Chiang Mai University
Paramin Neranon: Prince of Songkla University

Journal of Economic Structures, 2023, vol. 12, issue 1, 1-17

Abstract: Abstract This study investigated the trade efficiency and trade effects under Free Trade Agreements for Thailand’s agricultural exports. There are five main trading partners comprising China, Japan, Australia, New Zealand, and India. The important agricultural commodities of rubber, cassava, fruits, vegetables, and herbs were assessed from 1998 to 2019. In a traditional stochastic frontier model the two error components of symmetric noise ( $${\nu }_{j}$$ ν j ) and a non-negative inefficiency ( $${u}_{j}$$ u j ) are assumed to be independent. This may result in invalid inferences due to misspecification. To address this obstacle, copula-based Gravity Stochastic Frontier Models (GSFM) using panel criteria were constructed to estimate trade efficiency. Empirically, the Student-t copula-based SFM minimizes both AIC and BIC. According to their mean TE, China (0.48) and Japan (0.48) had the highest export efficiencies followed by India (0.41), New Zealand (0.39), and Australia (0.33) in rank order. Hence, Thailand should pursue more FTA negotiations with the trading partners. Moreover, they should promote miscellaneous behind-the-border barriers to stimulate flows of goods to enhance the country’s trade efficiency substantially.

Keywords: Trade efficiency; Free trade agreements; Autocorrelated inefficiency component; Copula-based gravity stochastic frontier model; Thailand’s trade potential (search for similar items in EconPapers)
JEL-codes: F02 F13 F15 F41 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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DOI: 10.1186/s40008-023-00303-0

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