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American Economic Review: Vol. 101 No. 4 (June 2011)

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What Do Trade Negotiators Negotiate About? Empirical Evidence from the World Trade Organization

Article Citation

Bagwell, Kyle, and Robert W. Staiger. 2011. "What Do Trade Negotiators Negotiate About? Empirical Evidence from the World Trade Organization." American Economic Review, 101(4): 1238-73.

DOI: 10.1257/aer.101.4.1238

Abstract

According to the terms-of-trade theory, governments use trade agreements to escape from a terms-of-trade-driven prisoner's dilemma. We use the terms-of-trade theory to develop a relationship that predicts negotiated tariff levels on the basis of pre-negotiation data: tariffs, import volumes and prices, and trade elasticities. We then confront this predicted relationship with data on the outcomes of tariff negotiations associated with the accession of new members to the World Trade Organization. We find strong and robust support for the central predictions of the terms-of-trade theory in the observed pattern of negotiated tariff cuts. (JEL F11, F13)

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Authors

Bagwell, Kyle (Stanford U)
Staiger, Robert W. (Stanford U)

JEL Classifications

F11: Neoclassical Models of Trade
F13: Trade Policy; International Trade Organizations


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