Terms of Trade and Global Efficiency Effects of Free Trade Agreements, 1990-2002
This paper infers the terms of trade effects of Free Trade Agreements (FTA's) with the structural gravity model. Using panel data methods to resolve two way causality between trade and FTA's, we estimate direct FTA effects on bilateral trade volume in 2 digit manufacturing goods from 1990-2002. We deduce the terms of trade changes implied by these volume effects for 40 countries plus a rest-of-the-world aggregate. Some gain over 10%, some lose less than 0.2%. Overall, using a novel measure of the change in iceberg melting, global efficiency rises 0.62%.
We are grateful to Scott Baier, Jeff Bergstrand, Rick Bond, Joseph François, Tomohiko Inui, Paul Jensen, Vibhas Madan, Peter Neary, Maria Olivero, Javier Reyes, and Costas Syropoulos for helpful comments and discussions. We also thank participants at the Western Economic Association Meetings 2009, the Fall 2009 Midwest International Trade Conference at Penn State, and department seminars at Boston College, Fordham University, the University of Nottingham and Oxford University. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
Anderson, James E. & Yotov, Yoto V., 2016. "Terms of trade and global efficiency effects of free trade agreements, 1990–2002," Journal of International Economics, Elsevier, vol. 99(C), pages 279-298. citation courtesy of