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Ronald A. Mariutto
PhD Candidate
Areas: Applied econometrics, Industrial organization and International
Economics
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Working Papers “The Growth of
Bilateralism” Scott
L. Baier, Jeffrey H. Bergstrand
and Ronald A. Mariutto Abstract: One of the most notable
international economic events over the past 20 years has been the
proliferation of bilateral free trade agreements (FTAs). Bilateral agreements
account for 80 percent of all agreements noti¯ed to
the WTO, 94 percent of those signed or under negotiation, and currently 100
percent of those at the proposal stage. Some have argued that the growth of
bilateralism is attributable to governments having pursued a policy of
“competitive liberalization" (implementing bilateral FTAs to preempt potential trade diversion
caused by FTAs of “third-country-pairs") but the growth of bilateralism
can potentially also be attributed to “tariff complementarities" (the
incentive for FTA members to form further liberalization agreements after
integration). Guided by new
comparative statics from the numerical general equilibrium monopolistic
competition model of FTA economic determinants in Baier
and Bergstrand (2004), we augment their parsimonious
logit (and probit) model
of the economic determinants of bilateral FTAs to incorporate
theory-motivated indexes to examine the influence of existing memberships on subsequent FTA memberships. The model can
predict correctly 90
percent of the
bilateral FTAs within five years of their formation, while still predicting
No-FTA correctly in 90 percent of the observations when no FTA exists, using
a sample of over 350,000 observations for pairings of 146 countries from
1960-2005. The results suggest that while evidence supports that “competitive
liberalization" is a force for bilateralism, the effect on the
likelihood that a pair of countries form an FTA due to each of the pair's own FTAs with other countries
(“tariff complementarities")
dominates over the effect of third-country-pairs' FTAs (i.e.,
competitive liberalization) for explaining the growth of bilateralism. Work In Progress “Estimating Trade Creation and Trade Diversion Under
Endogenous Liberalization” “Endogenous Tariffs, Free Trade Agreements, and
Transportation Costs”
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