Abstract
This paper seeks to determine why countries form regional trade agreements. Using bilateral data from 1950 to 2013 for 468 trade agreements and 179 countries, I use survival analysis to examine the factors that determine the likelihood of two countries entering into a trade agreement at any point in time. Potential explanatory variables include prior trade flows, export distance, GDP, per-capita GDP, geography, culture, and institutions. The results show that trade, per-capita GDP, and similarities in culture and institutions increase the likelihood that two countries will form a regional trade agreement. Larger, more distant, and more isolated countries are less likely to form an RTA, as are country-pairs that are different in size.
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Notes
See https://www.wto.org/english/tratop_e/region_e/region_e.htm for descriptions of the different types of regional trade agreements.
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Cyrus, T.L. Why Do Countries Form Regional Trade Agreements? A Discrete-Time Survival Analysis. Open Econ Rev 32, 417–434 (2021). https://doi.org/10.1007/s11079-020-09603-5
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DOI: https://doi.org/10.1007/s11079-020-09603-5