The views expressed herein are those of the author and should not be attributed to the IMF, its Executive Board, or its management. Part of the work was conducted at the University of Oxford. We are grateful to Adrian Wood and Chris Adam for their invaluable suggestions.
Does it Matter Who You Sign With? Comparing the Impacts of North–South and South–South Trade Agreements on Bilateral Trade
Article first published online: 15 AUG 2013
© 2013 John Wiley & Sons Ltd
Review of International Economics
Volume 21, Issue 4, pages 765–782, September 2013
How to Cite
Behar, A. and Cirera-i-Crivillé, L. (2013), Does it Matter Who You Sign With? Comparing the Impacts of North–South and South–South Trade Agreements on Bilateral Trade. Review of International Economics, 21: 765–782. doi: 10.1111/roie.12069
The International Monetary Fund retains copyright and all other rights in the manuscript of this article as submitted for publication.
- Issue published online: 15 AUG 2013
- Article first published online: 15 AUG 2013
Free trade agreements (FTAs) lead to a rise in bilateral trade regardless of whether the signatories are developed or developing countries. Furthermore, the percentage increase in bilateral trade is higher for South–South agreements than for North–South agreements. The results are robust across a number of gravity model specifications in which we control for the endogeneity of FTAs (with bilateral fixed effects) and also take account of multilateral resistance in both estimation (with country-time fixed effects) and comparative statics (analytically). Our analytical model shows that multilateral resistance dampens the impact of FTAs on trade by less in South–South agreements than in North–South agreements, which accentuates the difference implied by our gravity model coefficients, and that this difference becomes larger as the number of signatories rises. For example, allowing for lags and multilateral resistance, a four-country North–South agreement raises bilateral trade by 53% while the analogous South–South impact is 107%.