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Do Customs Union Members Engage in More Bilateral Trade than Free‐Trade Agreement Members?
Author(s) -
Roy Jayjit
Publication year - 2010
Publication title -
review of international economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.513
H-Index - 58
eISSN - 1467-9396
pISSN - 0965-7576
DOI - 10.1111/j.1467-9396.2010.00904.x
Subject(s) - economics , gravity model of trade , bilateral trade , international economics , free trade agreement , customs union , international free trade agreement , international trade , free trade , popularity , trade barrier , political science , law , china
This paper provides the first empirical analysis directly comparing the effects of customs unions (CUs) and free‐trade agreements (FTAs) on members’ bilateral trade, while addressing the biases arising from log‐linearization of the gravity model and crucial time‐invariant unobservables. Since Fiorentino et al. (2007) question the popularity of CUs relative to FTAs, considering the latter to be more practical in the current trading climate, such a comparison seems especially relevant. While Baier and Bergstrand (2007) find an FTA to approximately double members’ bilateral trade after 10 years, the results of this paper find CUs to have had a much larger impact than FTAs.