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Maria Ptashkina, Princeton University

Empirical Microeconomics

Friday, April 26, 2024, 01:30pm - 03:00pm

"Revisiting the Effects of Preferential Trade Agreements"

Abstract: Almost every country in the world is a member of at least one preferential trade agreement (PTA). These agreements govern more than half of all world trade. Identifying the effects of PTAs on trade is challenging due to self-selection bias: countries choose to become members. To address the selection issue, this paper builds a comprehensive dataset, and uses the blocking estimator from the causal inference framework. The paper shows that, after accounting for selection, PTAs increase bilateral trade by 48% fifteen years after entry into force. The effects phase in gradually, with one-third being realized five years prior to the agreement. Anticipation effects are only present for non-natural trading partners—geographically distant countries that trade little and have a low probability of signing an agreement. Other methods that do not account for selection substantially overestimate the effects. Equipped with the empirical estimates, this paper builds a model to analyze the general equilibrium effects of a recent important agreement.

1:30pm-3:00pm | In Person, 3rd Floor Library, NJ Hall | Coordinators: Tom Prusa & Hector Blanco Fernandez

Location  In Person, 3rd Floor Library, NJ Hall
Contact  Tom Prusa & Hector Blanco Fernandez