The CAFTA-DR Free Trade Agreement – Analyzing Its Effects in a Modern Gravity Framework

Principal Investigator(s): View help for Principal Investigator(s) Juan René Rojas Rodríguez, Universität Trier; Xenia Matschke, Universität Trier

Version: View help for Version V2

Name	File Type	Size	Last Modified
CAFTA_DR			10/12/2022 02:46:AM

Project Citation:

Rojas Rodríguez, Juan René, and Matschke, Xenia. The CAFTA-DR Free Trade Agreement – Analyzing Its Effects in a Modern Gravity Framework. Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 2022-10-15. https://doi.org/10.3886/E139641V2

Project Description

Summary:

We study the effects of the Dominican Republic - Central America - United States Free Trade Agreement (CAFTA-DR), signed in 2004, on the trade flows of its member states. Relying on the structural gravity model of trade framework, we find evidence of both increases and decreases in members' bilateral trade, but also of significant differences in these effects depending on the direction of trade and the trading members. Using a counterfactual analysis, we are also able to measure the general equilibrium effects of CAFTA-DR, finding that it has, in general, increased both total exports and income levels for El Salvador, Guatemala, Honduras and Nicaragua. However, we also find evidence of sizable trade diversion and welfare losses for Costa Rica and the Dominican Republic.

Scope of Project

Subject Terms: Gravity Model of Trade; Free Trade Agreements; International Trade; Central America; Dominican Republic; United States

Time Period(s): 1995 – 2019

Universe: Directional and annual exports ordered by origin and destination entities.

Collection Notes:

JEL Classification:

F14
F15

Methodology

Scales:

US $ Millions,

kilometers,

dummy variables

Unit(s) of Observation: exporting country - importing country - year

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Published Versions

V2 [2022-10-15]

V1 [2021-05-05]

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