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Does it matter who you sign with ? comparing the impacts of north-south and south-south trade agreements on bilateral trade
 
Author:Behar, Alberto; Criville, Laia Cirera i; Collection Title:Policy Research working paper ; no. WPS 5626Paper is funded by the Knowledge for Change Program (KCP)
Country:World; Date Stored:2011/04/06
Document Date:2011/04/01Document Type:Policy Research Working Paper
SubTopics:Economic Theory & Research; Emerging Markets; Free Trade; Trade Policy; Trade LawLanguage:English
Major Sector:Industry and tradeRel. Proj ID:1W-Export & Growth - Trta Program -- -- P111050;
Region:The World RegionReport Number:WPS5626
Sub Sectors:Other domestic and international tradeTF No/Name:TF098106-KCP II - Export Transaction Database
Volume No:1 of 1  

Summary: Free trade agreements lead to a rise in bilateral trade regardless of whether the signatories are developed or developing countries. Furthermore, the percentage increase in bilateral trade is higher for South-South agreements than for North-South agreements. In this paper, the results are robust across a number of gravity model specifications in which the analysis controls for the endogeneity of free trade agreements (with bilateral fixed effects) and also takes account of multilateral resistance in both estimation (with country-time fixed effects) and comparative statics (analytically). The analytical model shows that multilateral resistance dampens the impact of free trade agreements on trade by less in South-South agreements than in North-South agreements, which accentuates the difference implied by the gravity model coefficients, and that this difference gets larger as the number of signatories rises. For example, allowing for lags and multilateral resistance, a four-country North-South agreement raises bilateral trade by 53 percent while the analogous South-South impact is 107 percent.

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