• Corruption and Heterogeneous Effects of Trade Agreements on Trade. (Job Market Paper)

with Kevin Sylwester

Abstract: In this paper we consider if differences in the prevalence of corruption between members of Economic Integration Agreements (EIAs) make trade agreements more or less effective at boosting trade. Such differences could create more uncertainty that limits the potential for trade even if a trade agreement lowers barriers, implying that such agreements will not boost trade. On the other hand, trade agreements could be most effective in such disparate countries. Not only might trade agreements remove barriers used by corrupt officials to extort firms, but a trade agreement could reduce the uncertainty of operating in a different business environment by establishing rules and regulations. Results in this paper are allowed to differ across several dimensions, including extensive versus intensive margin, whether the exporter or importer is more corrupt, and between South-South and South-North trade. Using a gravity model of trade spanning a panel of countries from 1996 to 2017, we find that EIAs increase trade more along the intensive margin when importing countries are more corrupt but boost trade more along the extensive margin when exporting countries are more corrupt. Results are stronger for trade between South-South (S-S) countries than between North-South (N-S) countries. Given the fact that S-S trade has become more relevant and that more emerging market countries enter into trade agreements with one another, the findings of this paper are of increasing relevance. For instance, a country that considers whether to enter an EIA with a nation where corruption is more prevalent might take into account that this trade agreement has a potential to bust exports of new products as well as rise imports of existing goods.

• Environmental Provisions in Trade Agreements and Trade Diversion.

with Kevin Sylwester

Abstract: This study examines how specific provisions within trade agreements – particularly, provisions regarding environmental standards – affect trade creation and trade diversion. In this paper, we compare the effect of the depth of environmental provisions on dirty exports to its effect on trade in green products. We also differentiate between types of environmental provisions (such as restrictive or liberal provisions) and account for the exporter’s level of development. I follow Mattoo et al. (2017) and construct an index that captures importers’ average depth of trade agreements with the rest of the world where depth is taken as the extent that environmental provisions are covered. The inclusion of this depth variable allows us to see if any trade diversion effect arises from trade agreements with deep environmental norms. We observe trade diversion from restrictive environmental norms in the subsample of "dirty" trade, meaning that restrictive environmental provisions in trade agreements are not only effective at decreasing environmentally unsustainable trade between signatory nations, but also with countries outside the trade block.

• Heterogeneous Design of Trade Agreements and the Margins of Trade.

with Kevin Sylwester

Abstract: This paper considers the heterogeneous design of PTA’s, looking at the trade effects of different policy areas within trade agreements, while differentiating their impact on trade in new product varieties of goods versus trade in existing products. We specifically focus on 18 “core” provisions that Hofmann et al. (2019) mark as most economically relevant policies. We further distinguish three types of policies within the “core” group of provisions, namely: i) provisions that directly liberalize trade through either reduction in tariffs or simplification of standards, ii) policies that enable signatory nations to compete on equal grounds, and iii) provisions that specify the rules of investment. Previous studies that consider the effects of trade agreements on the margins of trade have either focused on the effects of different types of PTAs, rather than specific policies, or used limited data and outdated methodologies. We are contributing to the literature by assessing the impact of different groups of policies on the margins of international trade using a highly disaggregated dataset covering a large number of countries and years. We also employ Factor Analysis to check robustness of our findings using regular count indices. Our results indicate that provisions that tend to reduce barriers to trade through either simplification of standards or reduction in monetary charges tend to increase trade in existing varieties of goods, while the effect of investment provisions is either insignificant or might actually lower trade.