Exploring the Heterogeneous Impact of Trade Agreements on Trade: Depth Matters

Abstract

Abstract One of the most relevant features in the context of international trade in recent decades is the increase in the depth of trade agreements. The aim of this article is to explore the heterogeneous effect of preferential trade agreements (PTAs) on bilateral trade flows including their depth in addition to other agreement characteristics such as the geographical scope of the member countries, their degree of development, or their nature. To measure depth, we follow the most recent works that propose indirect instead of direct measures. Once we control for depth, our results reveal that (i) the positive effect of regional PTAs is notably larger for deep agreements whereas the shallow interregional agreements do not seem to increase bilateral trade flows; (ii) North–North PTAs only boost trade when they exhibit a high depth level; and (iii) the depth is not a relevant factor for plurilateral agreements and those that consist of the adhesion of a country to an existent PTA.