Thursday, April 5, 2012

Contagious FTAs

Even this is not really a development paper, I think I received the very good news of the acceptance of my work on contagious Free Trade Agreements with Richard Baldwin in the Journal of International Economics a lot more as a development than as a trade economist: shouting and jumping in a Internet cafe in Juba, and then toasting with Black Label at the Ethiopian bar besides (6 South Sudanese pounds for the double shot). After 4 years of hard work with that paper, not even in my craziest dreams I could have imagined a better setting!

In the paper we show that even when countries might not have incentives to open to trade using FTAs, they will sign defensive FTAs to reduce the discrimination created by agreements of their neighbors. Using an index gleaned from Spatial Econometrics techniques, we show empirical evidence for the Domino Theory of regionalism, made famous by Richard in the early 90s.

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