On the relationship between the breadth of preferential trading arrangements and trade flows

R. Falvey*, N. Foster-McGregor

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review


This paper uses matching econometrics to extend the literature investigating the impact of preferential trading arrangements (PTAs) on goods trade flows. Heterogeneity in PTAs is accounted for through a “provision count index” derived from data provided in a recent World Bank study. PTA formation now involves two separate, sequential decisions—first, whether two trading partners should form a PTA, and second, if they do, how broad that agreement should be. We find our explanatory variables are significant for both decisions, but often have opposing effects on each. Using matched PTA and non-PTA groups of country pairs, we estimate a dose–response function which indicates that arrangements with few provisions and arrangements with many provisions do not appear to have a significant impact on goods trade flows between their members. PTAs in an intermediate range are shown to have a significant positive effect. We then relate these outcomes to the actual content of the PTAs using the concept of “provision intensity.”
Original languageEnglish
Pages (from-to)1088-1110
Number of pages23
JournalThe World Economy
Issue number4
Publication statusPublished - Apr 2018

JEL classifications

  • o24 - "Development Planning and Policy: Trade Policy; Factor Movement; Foreign Exchange Policy"
  • f49 - Macroeconomic Aspects of International Trade and Finance: Other
  • f53 - "International Agreements and Observance; International Organizations"


  • preferential trade agreements
  • PTA breadth
  • trade flows


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