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The Political Economy of Preferential Trade Agreements: An Empirical Investigation

Facchini, Giovanni; Silva, Peri; Willmann, Gerald

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Authors

Peri Silva

Gerald Willmann



Abstract

We develop a political economy model to study the decision of representative democracies to join a preferential trading agreement (PTA), distinguishing between free trade areas (FTA) and customs unions (CU). Our theoretical analysis shows that bilateral trade imbalances and income inequality are important factors determining the formation of PTAs, whereas the patterns of geographic specialisation explain whether a CU or an FTA will emerge. Our empirical analysis-using a comprehensive panel dataset spanning 187 countries over the period 1960-2015-provides strong support for these predictions.

Citation

Facchini, G., Silva, P., & Willmann, G. (2021). The Political Economy of Preferential Trade Agreements: An Empirical Investigation. Economic Journal, 131(640), 3207-3240. https://doi.org/10.1093/ej/ueab044

Journal Article Type Article
Acceptance Date Apr 30, 2021
Online Publication Date May 27, 2021
Publication Date May 27, 2021
Deposit Date May 4, 2021
Publicly Available Date Mar 29, 2024
Journal The Economic Journal
Print ISSN 0013-0133
Electronic ISSN 1468-0297
Peer Reviewed Peer Reviewed
Volume 131
Issue 640
Pages 3207-3240
DOI https://doi.org/10.1093/ej/ueab044
Keywords Free Trade Areas; Customs Unions; Trade Imbalances; Income Inequality
Public URL https://nottingham-repository.worktribe.com/output/5508523
Publisher URL https://academic.oup.com/ej/article-abstract/131/640/3207/6286930
Additional Information This is a pre-copyedited, author-produced version of an article accepted for publication in The Economic Journal following peer review. The version of record Giovanni Facchini, Peri Silva, Gerald Willmann, The Political Economy of Preferential Trade Agreements: An Empirical Investigation, The Economic Journal, Volume 131, Issue 640, November 2021, Pages 3207–3240 is available online at: https://doi.org/10.1093/ej/ueab044.

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