Heterogeneous effects of preferential trade agreements: How does partner similarity matter?

Juyoung Cheong, Do Won Kwak, Kam Ki Tang

Research output: Contribution to journalArticle

13 Citations (Scopus)

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 languageEnglish
Pages (from-to)222-236
Number of pages15
JournalWorld Development
Volume66
DOIs
Publication statusPublished - 2015 Feb 1
Externally publishedYes

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

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