Free Trade Agreements In the Americas: Are the Trade Effects Larger than Anticipated?
Scott Baier (),
Jeffrey Bergstrand () and
The World Economy, 2007, vol. 30, issue 9, 1347-1377
This paper argues that the â€˜competitive liberalisationâ€™ of national governments of the past several decades reflects national governmentsâ€™ 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 crossâ€ section) ex post empirical evaluations of the effects of EIAs on trade have seriously overâ€ or underestimated the effects, partly due to ignoring the (endogenous) selfâ€ 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 1960â€“2000 than previously found and the ex post estimates are less fragile than those in earlier crossâ€ section analyses. The results shed further light on understanding the causes and consequences of the growth of regionalism in the world.
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