Journal of Economics and Management Volume 15, No. 2 August, 2019

The Lasting Effects of Economic Integration Agreements on Trade

Thi Hoang Oanh Nguyen

Department of Economics, National Chung Cheng University, Taiwan.

Wei-Chih Chen

Department of Economics, National Chung Cheng University, Taiwan.

Abstract

This paper investigates the lasting effect of economic integration agreements (EIA) on trade flows after the agreement is terminated or member countries withdraw from it. Using bilateral trade data among 149 countries over the period 1962-2000, we find that the positive effect of EIAs on trade persists even after the agreement is terminated. This effect occurs mainly along the intensive margin. The lasting effect is stronger in the first few years after the EIA is terminated, and it gets weaker and becomes insignificant in the long run. Our findings are robust to various empirical model specifications and measurements of variables.

Keywords：Economic Integration Agreements, Extensive Margin, Intensive Margin, Panel Data.

JEL Classifications：F1, F10, F15.

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