Are All Trade Agreements Equal? : The Role of Distance in Shaping the Effect of Economic Integration Agreements on Trade Flows
How does geographic distance affect the impact of trade agreements on bilateral exports, and through what channels? This paper examines this questions in a gravity model context for different types of goods for 185 countries over the period 1965-20...
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| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2016
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| Online Access: | http://documents.worldbank.org/curated/en/2016/08/26741306/all-trade-agreements-equal-role-distance-shaping-effect-economic-integration-agreements-trade-flows http://hdl.handle.net/10986/25054 |
| Summary: | How does geographic distance affect the
impact of trade agreements on bilateral exports, and through
what channels? This paper examines this questions in a
gravity model context for different types of goods for 185
countries over the period 1965-2010. Three stylized facts
emerge. First, although economic integration agreements have
a positive impact on trade flows, geographic distance
significantly decreases their effect. Second, this
phenomenon is in large part explained by the impact of
economic integration agreements on distance-sensitive goods,
in particular intermediates. These results hold when
controlling for trade agreement depth, measured by the type
of agreement and content of provisions, and economic
similarity among trading partners. Third, this paper finds
either no significant effect or a positive interaction
between distance and economic integration agreements for
final goods, suggesting that trade agreements among
countries located far from each other help consumption
patterns shift toward the most efficient producers. |
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