TITLE

TRADE EFFECTS OF CONTINENTAL AND INTERCONTINENTAL PREFERENTIAL TRADE AGREEMENTS

AUTHOR(S)
Gil-Pareja, Salvador; Llorca-Vivero, Rafael; Martínez-Serrano, José Antonio
PUB. DATE
March 2012
SOURCE
Transformations in Business & Economics;2012, Vol. 11 Issue 1, p20
SOURCE TYPE
Academic Journal
DOC. TYPE
Article
ABSTRACT
The economic geography literature calls preferential trade agreements (PTAs) that are drawn along continental lines natural, to distinguish them from intercontinental PTAs, which are called unnatural. According to the natural trading partner hypothesis trade blocs formed along continental lines offer more hope to be welfare-improving in terms of trade than trade blocs that cross different continents. This paper examines the effect on trade of continental and intercontinental PTAs. To this end, using the gravity equation we estimate trade creation and trade diversion effects of both kinds of PTAs on a sample of 182 countries over the period 1960-2005. The use of the standard panel data techniques gives support to the natural trading partner hypothesis. However, the estimation using recent developments in the econometric analysis of the gravity equation do not provide support to this hypothesis leading us to conclude that the proliferation of both kinds of PTAs (continental and intercontinental) has positive effects on trade.
ACCESSION #
85803259

 

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