Estimating the effects of free trade agreements on international trade flows using matching econometrics

This paper provides the first cross-section estimates of long-run treatment effects of free trade agreements on members' bilateral international trade flows using (nonparametric) matching econometrics. Our nonparametric cross-section estimates of ex post long-run treatment effects are much more stable across years and have more economically plausible values than corresponding OLS cross-section estimates from typical gravity equations. We provide plausible estimates of the long-run effects of membership in the original European Economic Community (EEC) and the Central American Common Market (CACM) between 1960 and 2000 and the estimates confirm anecdotal reports of these agreements' effectiveness. (c) 2008 Elsevier B.V. All rights reserved.