Get access

THE CONSIDERATION OF HUB-AND-SPOKE STATUS IN FTA FORMATION

Authors

  • Jiyun Cao

    Corresponding author
    1. The School of Economics, Nankai University, Tianjin, P.R. China
    • Correspondence: Jiyun Cao, The School of Economics, Nankai University, Tianjin, 300071, P.R. China. Tel: +86-22-23501379; Fax: +86-22-23503164; Email: caojiyun@nankai.edu.cn. I would like to thank Professor Michael R. Wickens, Dr Francesco Bravo, Professor Siu-Kee Wong, Professor Gulcin Ozkan, the Associate Editor, and two anonymous referees for their very useful comments. The usual disclaimer applies. The research is supported by the Fundamental Research Fund for the Central University (Grant No. NKZXB10054) and the Humanities and Social Sciences Planning Fund from the Chinese Ministry of Education (Grant No. 10YJA790008).

    Search for more papers by this author

ABSTRACT

This paper extends the literature on the determinants of free trade area (FTA) taking hub-and-spoke status and hub status-seeking into account. The analysis is based on purely cross-sectional data and the main findings are different from previous studies. First, the hub-and-spoke status and hub status-seeking are two important determinants of FTA. Moreover, the hub-and-spoke status and hub status-seeking have greater partial effects on the response probabilities than other determinants. Second, the probability of forming an FTA between a pair of economies is higher if they share a common language. Finally, the probability of forming an FTA between a pair of economies falls at first but eventually increases as the difference in their relative factor endowments increases.

Ancillary