Disaggregating PTAs at the role of international division of labor on PTA formation

College

Ramon V. Del Rosario College of Business

Department/Unit

Economics

Document Type

Archival Material/Manuscript

Publication Date

10-2008

Abstract

This paper shows that additional insights on PTA formation can be gained from separating North-South, North-North, and South-South country pairs. Inter-industry trade is mostly significant for all country pairs and intra-industry trade has a positive impact only for North-South and North-North country pairs. Controlling for geographical proximity, countries choose PTA partners with which they have a history of trading. Using a simple model, this paper demonstrates that trade protection is not the necessary outcome with international product fragmentation. Empirical findings support the hypothesis that international division of labor has influenced the formation of North-South PTAs.

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Disciplines

Economics | International Economics

Series Title

Working paper (University of Hawai'i at Manoa. Department of Economics) ; no. 08-06

Keywords

Commercial treaties; Foreign trade regulation; Division of labor

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