Determinants of Trade Policy: Insights from a Structural Gravity Model

Joachim Jarreau

The World Bank Economic Review, 2015, vol. 29, issue suppl_1, S155-S163

Abstract: This paper studies the impacts and determinants of trade policy: preferential trade agreements and multilateral opening. I estimate sector-level trade elasticities to calibrate a multi-sector Armington model of trade. I then use it to compute the price and real wage impacts of trade policy over 2001–2007, as well as the impacts of hypothetical, nonsigned trade agreements. I find that real wage gains positively predict the probability to sign a preferential agreement. Gains from multilateral opening reduce this probability. Finally, expected production price increases, reflecting market access gains, are a stronger determinant of the signing of PTAs than gains in the form of lower consumption prices.

Date: 2015
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