Dynamic preferential trade agreement formation and the role of political economy
Eric Conglin Chi,
Halis Murat Yildiz
Abstract:Using a dynamic preferential trade agreement (PTA) formation model, we show that political biases in exporting and import‐competing sectors substantially impact the extent of PTA formation. While both exclusion and free riding incentives constrain the expansion to global free trade in a free trade agreement (FTA) game, only the former incentive arises in a customs union (CU) game. When we endogenize the choice between FTAs and CUs, the tension between the flexibility benefit of FTAs and the coordination benefi… Show more
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