Vortrag
Trade Persistence and the Limits of Trade Agreements

Florian Mölders

Conference on Development Economics and Policy : Seventh Annual Conference of the German Economic Association, Research Committee on Development Economics
Berlin, 24.06.2011 - 25.06.2011



Abstract:
International trade ows reveal strong persistence over time. This paper is concerned with the role of trade agreements in this persistent environment. The data reveal a high level of heterogeneity of the trade- creating effect along the trade volume and per-capita income distributions. If controlled for persistence in bilateral trade ows, I find that higher per- capita incomes are associated with smaller increases in bilateral trade ows if an agreement is present, compared to lower-income countries. This gives rise to a re-assessment of trade agreements and hence of economic policy. While they are a powerful tool for trading partners at the lower end of the per-capita income distribution, they are less so at the upper end.