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Weak Governments and Trade Agreements ∗ Jean-Louis

By Marcelo Olarreaga and Laura Zoratto


The recent theoretical literature on the determinants of trade agreements has stressed the importance of political gains, such as credibility, as a rationale for trade agreements. The empirical literature, however, has lagged behind in the estimation of the economic gains or losses associated with these politically motivated trade agreements. This paper fills that gap by providing estimates of the economic impact of politically and economically motivated trade agreements. We find that credibility gains play a role in increasing the probability of two countries signing an agreement. Moreover, agreements with a stronger political motivation are more trade creating than agreements that are signed for pure market access / economic reasons

Topics: Political Economy, International Trade, Trade Agreements, Credibility. ∗We are grateful to Richard Baldwin, Paul Bergin, Celine Carrere, Peter Egger, Delfim Gomes-Neto, Chris Grigoriou, Sylviane Guillaumont, Keith Head, Simon Hug, Thierry Mayer, Doug Nelson, Pascalis Raimondos
Year: 2010
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