Abstract
The gravity model is used frequently to estimate the impact of European Union (EU) Preferential Trade Agreements (PTA) on trade flows. Because of differences in the datasets, sample sizes and independent variables employed, existing studies report very different estimates. This chapter reviews and analyses a large number of results using Meta-Analysis (MA) to provide pooled estimates of the effect of PTA on bilateral trade, based on fixed and random effects models. We test the estimation results for sensitivity to alternative specifications and different control variables. After filtering out potential biases, the MA confirms our expectations of a robust and positive effect of PTA.
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Notes
- 1.
Comprehensive surveys are provided by Nielsen (2003) and Cardamone (2007). Our approach complements these qualitative analyses with a more fine-granted quantitative synthesis. The use of MA has increased in economics; Cipollina and Salvatici (2010b) provide an MA of the literature on the impact of reciprocal trade agreements on trade flows between partners.
- 2.
Empirical economic studies are using MA methods increasingly, in different fields of economic research. A Special Issue of the Journal of Economic Surveys (2005, Vol.19, No. 3) was dedicated to MA.
- 3.
Another graphical method is the Egger test, which detects funnel plot asymmetry by determining whether the intercept significantly deviates from zero, in a regression of the standardized effects estimates against their precision.
- 4.
The “silver medal” mistake arises from the fact that gravity models usually are estimated in log form: in this case, computing the wrong average trade (the arithmetic average corresponding to the log of the sums, rather than the geometric average corresponding to the sum of the logs) tends to overestimate the trade effects. All the studies in our sample use the correct average so we do not have to control for this bias.
- 5.
In this literature, most of the studies using panel techniques rely on static panel data models.
- 6.
Dummies for the 1970s, 1980s and 1990s are not included in the MRA considering studies adopting preference margins since most of the estimates relate only to the 2000s (see Table 5.6).
- 7.
Under the null hypothesis of no effect (γ = 0), no publication selection and independence, the statistic minus twice the sum of the logarithms of the p-values is distributed approximately as a χ 2 with 2n degrees of freedom (Fisher 1932).
- 8.
References
Aiello F, Agostino MR, Cardamone P (2006) Reconsidering the impact of trade preferences in gravity models. Does aggregation matter? TradeAG Working Paper.
Aiello F, Cardamone P (2010) Analysing the effectiveness of the EBA initiative by using a gravity model. Pue&Piec Working Paper n. 10/7.
Aiello F, Demaria F (2009) Do trade preferential agreements enhance the exports of developing countries? Evidence from the EU GSP. PRIN PUE&PIEC 2007 Working Paper n. 2009/18 (available via http://www.ecostat.unical.it/anania/PUE&PIEC%20Working%20Papers.htm).
Ashenfelter O, Harmon C, Oosterbeek, H (1999) A review of estimates of the schooling/earnings relationship, with tests for publication bias. Labour Economics 6:453–470.
Baier SL, Bergstrand JH (2007) Do free trade agreements actually increase members’ international trade? J of International Economics 71:72–95.
Baldwin R (2006) The Euro’s trade effects. European Central Bank Working Paper n. 594.
Baldwin R, Taglioni D (2006) Gravity for dummies and dummies for gravity equations. NBER Working Paper n. 12516.
Burger MJ, van Oort FG, Linders GM (2009) On the specification of the gravity model of trade: zeros, excess zeros and zero-inflated estimation. Spat Econ Anal 4(2):167–190.
Caporale GM, Rault C, Sova R, Sova A (2009) On the bilateral trade effects of free trade agreements between the EU-15 and the CEEC-4 countries. Rev of World Economy 145:189–206.
Card D, Krueger AB (1995) Time-series minimum-wage studies: a meta-analysis. Am Econ Rev 85:238–43.
Cardamone P (2007) A survey of the assessments of the effectiveness of Preferential Trade Agreements using gravity models. International Economics 60(4):421–473.
Cardamone P (2011) The effect of preferential trade agreements on monthly fruit exports to the European Union. Eur Rev of Agric Economics, doi: 10.1093/erae/jbq052.
Cipollina M, Laborde D, Salvatici L (2010) Do preferential trade policies (actually) increase exports? A comparison between EU and US trade policies. Paper presented at ETSG 2010 in Lausanne, Switzerland, 9–11 September.
Cipollina M, Salvatici L (2010a) The impact of European Union agricultural preferences. J of Econ Policy Reform 13:87–106.
Cipollina M, Salvatici L (2010b) Reciprocal trade agreements in gravity models: A Meta-Analysis. Rev of International Economics 18:63–80.
Demaria F (2009) Empirical analysis on the impact of the EU GSP scheme on the agricultural sector. Dissertation, University of Calabria.
Engel C (2002) Comment on Anderson and van Wincoop. In: Collins S, Rodrik D (eds) Brookings trade forum 2001. The Brookings Institution, Washington.
Fisher RA (1932) Statistical methods for research workers. Oliver and Boyd, London.
Francois J, Hoekman B, Manchin M (2006) Preference erosion and multilateral trade liberalization. The World Bank Econ Rev 20:197–216.
Glass GV, McGaw B, Lee Smith M (1981) Meta-Analysis in social research. Sage, Beverly Hills, CA.
Helpman E, Melitz M, Rubinstein Y (2008) Estimating trade flows: trading partners and trading volumes. Q J of Economics 123(2):441–487.
Higgins JPT, Thompson SG (2002) Quantifying heterogeneity in a meta-analysis. Statistics in Med 21:1539–58.
Linders GJM, de Groot HLF (2006) Estimation of the gravity equation in the presence of zero flows, Tinbergen Institute Discussion Paper, TI 2006-072/3.
Manchin M (2006) Preference utilisation and tariff reduction in EU imports from ACP countries. The World Economy 29:1243–1266.
Martin W, Pham SC (2008) Estimating the gravity equation when zero trade flows are frequent. World Bank.
Martínez-Zarzoso I, Nowak-Lehmann DF, Horsewood N (2009) Are regional trading agreements beneficial? Static and dynamic panel gravity models. N Am J of Economics and Finance 20(1):46–65.
Nielsen CP (2003) Regional and preferential trade agreements: a literature review and identification of future steps. Fodevareokonomisk Institut, Copenhagen, Report n. 155.
Nilsson L (2002) Trading relations: is the roadmap from Lomé to Cotonou correct? Appl Economics 34:439–452.
Nilsson L (2009) Small trade flows and preference utilization. Mimeo, European Commission, DG Trade.
Nilsson L, Matsson N (2009) Truths and myths about the openness of EU trade policy and the use of EU trade preferences. Working Paper http://trade.ec.eu.europa.eu/doclib/docs/2009/july/tradoc_143993.pdf. Accessed 2009.
Oguledo VI, MacPhee CR (1994) Gravity models: a reformulation and an application to discriminatory trade arrangements. Appl Economics 26:107–120.
Péridy N (2005) The trade effects of the Euro-Mediterranean partnership: what are the lessons for ASEAN countries? J of Asian Economics 16:125–139.
Proenca I, Fontoura MP, Martìnez-Galàn E (2008) Trade in the enlarged European Union: a new approach on trade potential. Portuguese Econ J 7:205–224.
Rose AK, Stanley TD (2005) Meta-analysis of the effect of common currencies on international trade. J of Econ Surveys 19:347–365.
Santos-Silva JMC, Tenreyro S (2006) The log of gravity. Rev Econ Statist 88:641–658.
Siliverstovs B, Schumacher D (2009) Estimating gravity equations: to log or not to log? Empirical Economics 36:645–669.
Stanley TD (2005) Beyond publication bias. J of Econ Surveys 19:309–346.
Stanley TD, Jarrell SB (2005) Meta-regression analysis: a quantitative method of literature surveys. J of Econ Surveys 19:299–308.
Sutton AJ, Abrams KR, Jones DR, Sheldon TA, Song F (2000) Methods for meta-analysis in medical research. John Wiley, Chichester.
Acknowledgments
We acknowledge financial support from the “New Issues in Agricultural, Food and Bio-energy Trade (AGFOODTRADE)” (Small and Medium-scale Focused Research Project, Grant Agreement no. 212036) research project funded by the European Commission, and the “European Union policies, economic and trade integration processes and WTO negotiations” research project funded by the Italian Ministry of Education, University and Research (Scientific Research Programs of National Relevance 2007). We thank Paola Cardamone, Luca De Benedictis and Luca Salvatici for their useful comments on an earlier draft of the chapter. We also thank all participants in the fourth annual international MAER-Net Colloquium, organized by the Meta-Analysis of Economic Research Network and the Hendrix College. The views expressed in this paper are the sole responsibility of the authors and do not necessarily reflect those of the European Commission.
Author information
Authors and Affiliations
Corresponding author
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2011 Springer-Verlag Berlin Heidelberg
About this chapter
Cite this chapter
Cipollina, M., Pietrovito, F. (2011). Trade Impact of European Union Preferential Policies: A Meta-Analysis of the Literature. In: De Benedictis, L., Salvatici, L. (eds) The Trade Impact of European Union Preferential Policies. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-16564-1_5
Download citation
DOI: https://doi.org/10.1007/978-3-642-16564-1_5
Published:
Publisher Name: Springer, Berlin, Heidelberg
Print ISBN: 978-3-642-16563-4
Online ISBN: 978-3-642-16564-1
eBook Packages: Business and EconomicsEconomics and Finance (R0)