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Economic integration agreements and the margins of international trade

Scott Baier (), Jeffrey Bergstrand () and Michael Feng

Journal of International Economics, 2014, vol. 93, issue 2, 339-350

Abstract: One of the main policy sources of trade–cost changes is the formation of an economic integration agreement (EIA), which potentially affects an importing country's welfare. This paper: (i) provides the first evidence using gravity equations of both intensive and extensive (goods) margins being affected by EIAs employing a panel data set with a large number of country pairs, product categories, and EIAs from 1962 to 2000; (ii) provides the first evidence of the differential (partial) effects of various “types” of EIAs on these intensive and extensive margins of trade; and (iii) finds a novel differential “timing” of the two margins' (partial) effects with intensive-margin effects occurring sooner than extensive-margin effects, consistent with recent theoretical predictions. The results are robust to correcting for potential sample-selection, firm-heterogeneity, and reverse causality biases.

Keywords: Free trade agreements; International trade; Extensive margins; Intensive margins (search for similar items in EconPapers)
JEL-codes: F1 F15 (search for similar items in EconPapers)
Date: 2014
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DOI: 10.1016/j.jinteco.2014.03.005

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