The Trade Effects of Endogenous Preferential Trade Agreements

Structural new trade theory models have never been used to evaluate and quantify the role of preferential trade agreement (PTA) membership for trade in a way which is consistent with general equilibrium. Apart from filling this gap, the present paper aims at delivering an empirical model which takes...

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Bibliographic Details
Published in:American economic journal. Economic policy 2011-08, Vol.3 (3), p.113-143
Main Authors: Egger, Peter, Larch, Mario, Staub, Kevin E., Winkelmann, Rainer
Format: Article
Language:English
Subjects:
Bias
Bilateralism
Econometrics
Economic models
Economic policy
Equilibrium
Estimators
Exports
GDP
Gross Domestic Product
International trade
Modeling
Parametric models
Poisson distribution
Studies
Tariffs
Trade
Trade agreements
Trade liberalization
Trade policy
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Summary:Structural new trade theory models have never been used to evaluate and quantify the role of preferential trade agreement (PTA) membership for trade in a way which is consistent with general equilibrium. Apart from filling this gap, the present paper aims at delivering an empirical model which takes into account both that PTA membership is endogenous and that the world matrix of bilateral trade flows contains numerous zero entries. These features are treated in an encompassing way by means of (possibly two-part) Poisson pseudomaximum likelihood estimation with endogenous binary indicator variables in the empirical model.
ISSN:1945-7731
1945-774X
DOI:10.1257/pol.3.3.113