The dark side of the generalized system of preferences

Bernhard Herz and Marco Wagner

No 02/2010, Working Papers from German Council of Economic Experts / Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichen Entwicklung

Abstract: The Generalized System of Preferences (GSP) was established to promote the exports of low-income countries to industrialized countries in order to support their economic growth and development. However, the design of these schemes is rather complex and the effects of GSP have been found to be controversial. While previous studies solely analyzed preferential agreements of individual granting countries separately, implying a one-sided perspective, we take a general view and investigate the overall and dynamic effects common to the various GSP schemes in order to provide generalized recommendations for economic policy. In our empirical analysis, based on an extensive dataset covering most of world trade, we find that GSP tends to foster developing countries' exports in the short-run, but hampers them in the long-run. Also, GSP granting countries are able to promote their own exports initially, while in the long-run their exports decrease. Economically advanced GSP recipients 1 are more likely to benefit from GSP than less advanced countries. Taken together, GSP does not seem to be a suitable instrument to promote sustainable economic growth and development of low-income countries.

Keywords: GATT; WTO; GSP; trade; gravity model; regression (search for similar items in EconPapers)
JEL-codes: C13 C23 F13 F55 (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (6)

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Related works:
Journal Article: The Dark Side of the Generalized System of Preferences (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:svrwwp:022010

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