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The Effect of a Free Trade Agreement with the United States on Member Countries’ per capita GDP: A Synthetic Control Analysis

Author

Listed:
  • Esteban Colla-De-Robertis

    (Universidad Panamericana)

  • Rafael Garduño Rivera

    (Universidad Panamericana)

Abstract
This study employs the synthetic control method (SCM) to estimate the economic effects of signing free trade agreements (FTAs) with the United States. This method allows for a counterfactual –the country’s per capita GDP had it not signed a FTA–, which can be compared with the observed per capita GDP. This difference speaks to the causal impact of the FTA. We principally find that FTAs seem to have a heterogeneous impact. In particular, there is evidence that signing a FTA with the U.S. had a positive impact on Chile and Jordan’s per capita GDP and that NAFTA harmed Mexico’s per capita GDP. In several other cases, no significant economic impact is discernible. Besides, the more a country depends on the U.S. for its trade, the less beneficial signing a FTA with the U.S. is. This article contributes to the debate on the effectiveness of trade as a development strategy. In particular, the SCM opens up the possibility of a "case-by-case" analysis, ultimately revealing that a FTA with the U.S.–a country situated at the world’s technology frontier–has heterogeneous outcomes and, by itself, does not guarantee economic development (obtained through a higher per capita GDP).

Suggested Citation

  • Esteban Colla-De-Robertis & Rafael Garduño Rivera, 2022. "The Effect of a Free Trade Agreement with the United States on Member Countries’ per capita GDP: A Synthetic Control Analysis," Working Papers 201, Red Nacional de Investigadores en Economía (RedNIE).
    • Handle: RePEc:aoz:wpaper:201
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    2. Zhang, Qian & Cheng, Baodong & Diao, Gang & Tao, Chenlu & Wang, Can, 2023. "Does China's natural forest logging ban affect the stability of the timber import trade network?," Forest Policy and Economics, Elsevier, vol. 152(C).

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    More about this item

    Keywords

    International Linkages to Development; Comparative Studies; Free Trade Agreement; Impact Evaluation; Synthetic control method.;
    All these keywords.

    JEL classification:

    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration

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