SAFTA and AFTA: a comparative welfare analysis of two regional trade agreements

Journal of Economic Structures

The Official Journal of the Pan-Pacific Association of Input-Output Studies (PAPAIOS)

Table 2 Estimated values of trade cost functions

Independent Var	Baseline	OLS	HM	Benchmark
RTA	0.30 (0.07)	0.55 (0.05)	0.36 –	1.21 –
Distance	− 0.73 (0.04)	− 1.56 (0.03)	− 0.71 (0.03)	− 0.50 (0.03)
Border	0.35 (0.07)	0.63 (0.12)	0.34 (0.07)	0.20 (0.08)
Language	0.22 (0.07)	0.73 (0.06)	0.22 (0.07)	0.19 (0.08)
Colony	0.45 (0.15)	1.05 (0.07)	0.47 (0.15)	0.71 (0.17)

Number of countries C = 173 and number of observations N = 29,756. Baseline is the estimation of trade cost matrix with PPML in the preliminary step. OLS is the estimation of trade cost matrix with log-linear estimation in the preliminary step. In the rest two columns, I constrain estimated value of RTA coefficient from Head and Mayer (2014) and Egger et al. (2011) when estimating the partial effect of trade cost function using 2012 data. Values in round brackets are standard error. All partial estimates I have estimated are highly significant at 1% level of significance