Does the nature of regional trade agreements matter in promoting trade?

Shahid, Sohaib

Geneva : The Graduate Institute, Centre for Trade and Economic Integration, 2011 . - 43 p. : ill.

CTEI Working Papers ; 2011-11

Abstract: Globalization's 'second unbundling' has drastically altered the nature of international trade giving rise to what might be referred to as the trade-investment-service nexus. Today's RTAs are qualitatively different than those signed two decades ago, since they cover disciplines that go beyond preferential market access. This paper investigates whether the nature of RTAs matters when it comes to promoting trade. Controlling for the 'gravitational un-constant' terms, I use an augmented specification of the gravity model with a balanced panel over the 1994-2010 period. Employing four different econometric techniques taking care of zero trade flows, I check for robustness across all four procedures. Controlling for heterogeneity and self-selection of RTAs my results show that the nature of an RTA matters in trade promotion but the magnitude and direction of that relationship is unclear.

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