Working Paper: NBER ID: w16084
Authors: Richard Baldwin; Dany Jaimovich
Abstract: This paper presents a new model of the domino effect which is used to generate an empirical index of how "contagious" FTAs are with respect to third nations. We test our contagion hypothesis together with alternative specifications of interdependence and other political, economical and geographical determinants of FTA formation. Our main finding is that contagion is present in our data and is robust to various econometric specifications and samples.
Keywords: contagion effect; free trade agreements; international trade
JEL Codes: F13
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| FTAs signed by trade partners (F10) | likelihood of a nation signing its own FTAs (F15) |
| number of FTAs among trade partners (F10) | likelihood of a nation signing its own FTAs (F15) |
| importance of markets to nation's exporters (F10) | likelihood of a nation signing its own FTAs (F15) |
| signing of FTAs (F15) | political economy forces pushing excluded nations to pursue FTAs (F15) |
| signing of FTAs by either of two nations (F15) | likelihood of forming an FTA with each other (F15) |