Trade and diplomacy Economic determinants of international cooperation agreements and its effect on international trade in the post World War II era: 1945-2022
Pre-print, Working paper: We study the determinants of international cooperation and its effect on trade. We rely on a unique database of 31,982 International Cooperation Agreements (ICAs) signed between 1945-2022 by 193 countries. Estimating bilateral gravity equations, we find that trade follows the flag: ICAs increase bilateral exports by around 1-3%, with stronger effects for South-South relations. We address potential endogeneity through panel approach and an instrumental variable that exploits the network structure of international relations. Further, using LPM we find that gravity forces explain country pairs entering an ICA. Importantly, we find that ICAs serve as stepping stones towards Regional Trade Agreements, confirming a previous step in Balassa (1961) theory of economic integration. Our results shed new light on the international relations-trade nexus and contribute to the current debate on friendshoring.
Keywords JEL
Keywords
- International cooperation agreements
- International trade flows
- Regional trade agreements
- Gravity equation
Internal reference
- PSE Working Papers n°2024-42
Pages
- 78 p.
URL of the HAL notice
Version
- 2