Abstract
This paper studies the effects of economic integration, as well as the institutional quality of existing trade agreements in Latin America, on the margins of trade. The analysis is performed on bilateral exports of goods from 11 member countries of the Latin American Integration Association (LAIA) over the period 1962–2009. The authors distinguish the effects of different levels of integration on trade margins and different “timing”; and they go further by considering the effect of institutional quality of trade agreements on different sectors. Their results provide evidence of the benefits of regional integration, which is in line with LAIA members’ development and industrialization objectives.
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Notes
Nowak-Lehmann et al. (2007) focus on the effect of the Turkey-EU customs union on Turkish exports to the European Union (EU), while Márquez-Ramos and Martínez-Zarzoso (2014) discuss the mixed results obtained by previous research on the ex post effects of the Barcelona Process on exports from North African countries.
See Baier et al. (2007) for an analysis of the trade effects of EIAs in Latin America. More recently, Kohl (2014) estimates treatment effects for a total of 166 agreements. According to his results, 63.9 % have had a non-significant effect on trade flows, 26.5 % have had a trade-promoting effect, while the net effect of the remaining agreements (9.6 %) is negative. Agreements for which the overall effect is zero include the Andean Community, CARICOM and Mercosur. LAIA is found to have an overall positive treatment effect. In contrast, negative treatment effects can be observed for several Latin-American bilateral agreements.
Sector 1: primary goods and agricultural products; sector 2: industrial manufactured goods.
http://www.sela.org/view/index.asp?ms=258/ 28 member countries.
http://www.alianzabolivariana.org/ 9 member countries.
http://www.celac.gob.ve/ 33 member countries.
Mujica dijo que Argentina “hace añicos al Mercosur”, Clarín, 1 November 2013. In http://www.clarin.com/politica/Mujica-Argentina-maneja-boconeando-pamento_0_1021698189.html.
Note that the methodology presented in the working paper differs from the journal article.
We are very grateful to an anonymous referee for this suggestion.
Each table reports the results for three alternative LHS variables: bilateral trade, EM and IM, respectively. Additionally, we have vertically ordered the list of existing EIAs from shallower to deeper economic integration.
These results are available from the authors upon request.
Soete and Hove (2013) also include 5-years leads to analyse whether or not countries anticipate the preferential trade liberalization and they find that the coefficients for leads are statistically significant and positive for “deeper” EIAs. The “anticipation” effects are also positive and significant in our baseline FD regressions (Eq. 4). Full results are available from the authors upon request.
As pointed out previously, the two sectors that we consider are primary goods and agricultural products (sector 1), and industrial manufactured goods (sector 2).
That is, the regressor that considers the institutional quality of existing NRPTAs in LAIA members in Eq. (3).
That is, the further lag of 5–10 years for PTAs interacted with institutional quality in Eq. (4).
Note that FORWNRPTA_IIQ in Eq. (4) is the difference between F5.NRPTA_IIQ (i.e. the 5-years lead of the interaction of the NRPTA dummy and the index of institutional quality) and NRPTA_IIQ. FORWCU_IIQ denotes the difference between F5.CU_IIQ and CU_IIQ.
It should be noted that conclusions should be carefully drawn with respect to the EM, as this is where endogeneity still plays a role (see column 11 in Table 1).
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Acknowledgments
The authors gratefully acknowledge the support and collaboration of SECYT, Universidad Nacional de Córdoba, Universitat Jaume I and Generalitat Valenciana (SECYT 05/E349; P1-1B2013-06; PROMETEOII/2014/053). We thank María Victoria Barone and Pedro Degiovanni for their participation in database processing. We would also like to thank the following for their very helpful comments and suggestions: Federico Borrone, Andrea Molinari, an anonymous referee, the managing editor, and the participants in the Annual Meeting of the Asociación Argentina de Economía Política held in Trelew in November 2012; in the Jornadas Anuales del Banco Central del Uruguay, held in Montevideo in November 2012; in the 14th Annual Conference of SALISES, held in Barbados in April 2013; and in the Arnoldshain XI, held in Antwerp in June 2013.
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Florensa, L.M., Márquez-Ramos, L. & Recalde, M.L. The effect of economic integration and institutional quality of trade agreements on trade margins: evidence for Latin America. Rev World Econ 151, 329–351 (2015). https://doi.org/10.1007/s10290-015-0209-x
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DOI: https://doi.org/10.1007/s10290-015-0209-x