New measures of trade creation and trade diversion

This paper estimates the effects of regional agreements on trade flows controlling for country pair, importer-year, and exporter-year fixed effects. These fixed effects capture the determinants of trade flows normally included in gravity model specifications and control for yearly shocks to countrie...

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Bibliographic Details
Published in:Journal of international economics 2008-07, Vol.75 (2), p.349-362
Main Author: Magee, Christopher S.P.
Format: Article
Language:English
Subjects:
Agreements
Economic impact
Economic models
Estimates
Estimation
Gravity model
International trade
Measurement
Regional analysis
Regional trade agreements
Studies
Trade agreements
Trade creation
Trade diversion
Trade flows
Trade theory
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Summary:This paper estimates the effects of regional agreements on trade flows controlling for country pair, importer-year, and exporter-year fixed effects. These fixed effects capture the determinants of trade flows normally included in gravity model specifications and control for yearly shocks to countries' trade. Controlling for the fixed effects generally reduces the estimated trade impacts of regional agreements. The estimates reveal that regional agreements have significant anticipatory effects on trade flows and continue to affect trade for up to 11 years after they begin. The paper also presents estimated effects on individual countries' trade flows in year five of the agreements.
ISSN:0022-1996
1873-0353
DOI:10.1016/j.jinteco.2008.03.006