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Do Free Trade Agreements Increase The New Goods Margin? Evidence from Korea

Sang-Wook Cho ()

No 2016-02, Discussion Papers from School of Economics, The University of New South Wales

Abstract: This paper analyzes the role of the new goods margin, or the extensive margin, in the growth of trade between Korea and countries with which it has signed free trade agreements (FTAs). Using a methodology developed by Kehoe and Ruhl (2013), I look at the set of least-tradedgoods (or “new” goods) that constitutes the bottom decile of total trade value in 1995, and calculate its share of trade in 2013, when most of the bilateral trade agreements have come into full effect. On average, these new goods account for 26 percent of Korea’s exports and 31 percent of its imports post-FTA. When compared to a control group of main trade partners with no FTAs, I find that FTAs have more impact on the growth of new goods in imports rather than in exports. This difference may be due to the fact that Korea’s tariff barriers were relatively higher than those of its FTA partner countries. Despite rapid growth at the extensive margin, the main avenue of growth in trade came from growth along the intensive margin.

Keywords: Free trade agreement; Extensive margin; Intensive margin; Korea (search for similar items in EconPapers)
JEL-codes: F13 F14 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2016-05
New Economics Papers: this item is included in nep-int
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Journal Article: Do Free Trade Agreements Increase the New Goods Margin? Evidence from Korea (2018) Downloads
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