By
Christopher Magee*
This paper examines countries’ choices of partners for preferential trade agreements (PTAs). Using a data set that combines pairs of countries, I test economic and political theories about which pairs are most likely to negotiate PTAs. The tests provide empirical support for political explanations of preferential trade agreements. Countries are more likely to form an agreement if they are similar in per-capita income levels and capital-labor ratios, are similar in country size, and have relatively balanced bilateral trade. Even after controlling for the amount of bilateral trade, countries that are close together geographically are more likely to negotiate trade deals.
* Department of Economics, Bucknell University, Lewisburg, PA 17837; cmagee@bucknell.edu; phone (570)577-1752; fax (570)577-1364.