The Effects of the Trade Agreements on the Dynamics of Turkey's Export: Extensive and Intensive Margins

Abstract

The objective of this study is to analyze the effects of the Customs Union (CU) and Free Trade Agreements (FTA) on the extensive and intensive margins. For this purpose, initially, Turkey’s export data set composing HS-6 digit product level statistics for period 1996 to 2011 with 172 countries has been decomposed into extensive and intensive margins by using the decomposition method of export shares developed by Hummels and Klenow (2005). Then, the effects of the CU and FTA on both extensive and intensive margins have been identified with the Gravity model. All analyzes have been performed for the exports of the total goods as well as the exports of the final and intermediate goods. Empirical results for the Gravity model show that the effects of the CU and FTA on the extensive margin are negative while the effects of the CU and FTA on the intensive margin are positive. Furthermore, the effect of the CU on the extensive and intensive margins is greater than that of the FTA.