To read the full version of this content please select one of the options below:

Can trade agreements among small countries create trade?

Marie Freckleton (Department of Economics, University of the West Indies at Mona, Mona, Jamaica)
Patrice Whitely (Department of Economics, University of the West Indies at Mona, Mona, Jamaica)

International Journal of Development Issues

ISSN: 1446-8956

Article publication date: 16 April 2020

Issue publication date: 17 June 2020

Abstract

Purpose

The purpose of this paper is to examine the effects of a regional trade agreement among a group of small island developing states on trade creation and trade diversion.

Design/methodology/approach

An augmented gravity model and panel data are used to estimate the trade creation and trade diversion effects. The generalized method of moments technique is used to account for possible endogeneity. Country pair and time fixed effects are also included.

Findings

The regional trade agreement had a positive effect on intra-regional trade creation, but there was no significant diversion of imports from extra-regional trade partners.

Practical implications

Small developing economies can benefit from regional trade agreements (RTAs) among themselves. The trade diversion effects of such agreements are likely to be limited.

Originality/value

To the best of authors’ knowledge, this is the only paper which investigates the impact of RTAs among small island developing states.

Keywords

Citation

Freckleton, M. and Whitely, P. (2020), "Can trade agreements among small countries create trade?", International Journal of Development Issues, Vol. 19 No. 2, pp. 205-216. https://doi.org/10.1108/IJDI-06-2019-0110

Publisher

:

Emerald Publishing Limited

Copyright © 2020, Emerald Publishing Limited