Abstract
This paper examines how dissimilarity of partner country characteristics affects the change in trade flows under a preferential trade agreement (PTA). Our results show that the more similar the partner countries are, the larger the increase in intra-bloc trade is under a PTA. Particularly, there is a substantial "development neighborhood premium": the gain for developing countries from a PTA among themselves is about two and a half times that from partnering with industrial countries. Our findings challenge the perception that by becoming more integrated with industrial countries, developing countries could automatically gain access to a much larger and lucrative export market.
Original language | English |
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Pages (from-to) | 222-236 |
Number of pages | 15 |
Journal | World Development |
Volume | 66 |
DOIs | |
Publication status | Published - 2015 Feb 1 |
Externally published | Yes |
Keywords
- Gravity model
- Heterogeneity
- Preferential trade agreements
- Similarity
- Trade creation
ASJC Scopus subject areas
- Geography, Planning and Development
- Development
- Sociology and Political Science
- Economics and Econometrics