Analysis of Pakistan–China FTA by propensity score matching with difference in differences

This study explores the effect of the Pakistan–China Free trade agreement on the export value and dual margins of trade for Pakistan and China. This study attempts to fill the gap in the literature related to the Pakistan–China Free trade agreement. It will determine the average treatment effect of T of Pakistan–China FTA on the export value and dual margin of trade for Pakistan and China under Pakistan–China FTA through Propensity Score Matching with Difference-in-Differences (PSM-DID). Also, the study focuses on both the aggregate level and three significant commodities. According to the results, After Pakistan–China FTA, the export value and intensive margin of Pakistan to the Chinese market increased in both the FTA inclusive and FTA exclusive commodities. However, this increment is much higher for the commodities that are not included in Pakistan–China FTA compared to the commodities included in Pakistan–China FTA. Nevertheless, the increment in the extensive margin is higher for the commodities included in Pakistan–China FTA compared to the commodities that are not included in the Pakistan–China FTA. Also, the Pakistan–China FTA's effect on the export value of Pakistan to China is found to be higher in fishery products compared to salt, stone, cement, and cotton. Correspondingly, the growth in the intensive and extensive margin of Pakistan's exports to China due to Pakistan–China is higher in the fishery products as compare to the salt, stone, cement, and cotton.