Non Reciprocal Trade Agreements

The random effect is considered less plausible because it starts from a zero correlation between the non-observable trade agreement and the preferential trade agreement (TPP). In addition, previous empirical studies show overwhelming evidence of the rejection of a random gravity model compared to a fixed-effect gravity model using either bilateral pairs or country-specific fixed effects (Baier and Bergstrand 2007; Egger 2000). I also do a Hausman test and find that the p value is 0.01, which implies the rejection of the random effects model in favor of the solid effect gravity model (Baltagi 2008). Liu X (2009) GATT/WTO strongly encourages trade. Selecting examples and model specifications. Rev Int Econ 17:428-446 Candau F, Jean S (2005) What are the EU`s trade preferences for sub-Saharan Africa and other developing countries? CEPII Working Paper, No 2005-19 The gravitational equation has become the most important econometric approach for the ex post study of the “partial” (or direct) impact of economic integration agreements on all bilateral trade flows. After taking into account multilateral resistance conditions, with fixed effects that alter time and control of endogenous distortion using panel data techniques [6], [6] find that free trade agreements significantly increase countries` bilateral trade flows using five-year data from 1960 to 2000 for 96 countries. After this empirical strategy and the same set of data, [7] goes even further by comparing the effects of North-South and South-South trade agreements on bilateral trade and showing that free trade agreements lead to an increase in bilateral trade, whether the signatory countries are developing or industrialized countries. In particular, they note that the percentage increase in bilateral trade is higher in the South-South agreements than in the North-South agreements. The next natural step is to divide the “Dummy PTA” taking into account the group to which each business partner belongs (Column 4). The results indicate that preferential trade agreements have a positive impact in all four cases.