Work in Progress
Revisiting the Effects of Preferential Trade Agreements (Job Market Paper)
Distinguished CESifo Affiliate Award, Best Paper Award from the Spanish Association of International Economics and Finance, Best Student Paper from the Forum for Research in Empirical International Trade
Almost every country in the world is a member of at least one preferential trade agreement (PTA). These agreements govern more than half of all world trade. Identifying the effects of PTAs on trade is challenging due to self-selection bias: countries choose to become members. To address the selection issue, this paper builds a comprehensive dataset, and uses the blocking estimator from the causal inference framework. The paper shows that, after accounting for selection, PTAs increase bilateral trade by 48% fifteen years after entry into force. The effects phase in gradually, with one-third being realized five years prior to the agreement. Anticipation effects are only present for non-natural trading partners—geographically distant countries that trade little and have a low probability of signing an agreement. Other methods that do not account for selection substantially overestimate the effects. Equipped with the empirical estimates, this paper builds a model to analyze the general equilibrium effects of a recent important agreement.
Measuring Heterogeneity Across Preferential Trade Agreements
Most studies of preferential trade agreements (PTAs) use gravity models with PTAs as binary variables. This approach leaves out substantial amount of metadata and semantic information embodied within the texts. Over the last several decades the PTA texts have evolved, creating a considerable variation in the content and structure across agreements. This paper constructs a novel dataset with individual characteristics of PTAs and a document-term matrix. Using text-mining techniques and predetermined intended semantic meanings, the paper builds a continuous index measuring heterogeneity in legal enforceability across PTAs.
Anticipation Effects in Preferential Trade Agreements
Using data on Colombia's firm-product-level exports from 2006 to 2020 this project studies whether firms react in anticipation to preferential trade agreements. Detailed information is collected on the negotiation process (the announcement of the negotiations, the timing of the negotiation rounds, the treaty signature, etc.) Exploiting the variation across destinations for Colombian firms; exports, the project analyzes trade patterns over the life cycles of trade agreements. The universe of transactions makes it possible to disentangle the contributions of extensive and intensive margins of trade.