An empirical analysis of the impact of membership in regional trading agreements on economic development

Regional Trading Agreements (RTAs) have been expanding rapidly in number and importance over the past decade. This paper seeks to analyze the effectiveness of these agreements in fostering economic growth in their member countries. Drawing on panel data over the years 1982-2005, we conduct OLS and fixed effects vector decomposition procedures to generate empirical estimates of the growth impacts of 22 plurilateral RTAs and bilateral agreements with the European Community (EC). In order to distinguish between the performances of countries with different economic standing within an RTA, we also construct measures of the relative size and development of RTA members. Our results suggest that participation in Europe based North-North agreements and bilateral partnerships with the EC have been successful in advancing economic growth. Furthermore, we find some evidence of differences in RTA growth impacts on countries depending on their relative economic status within an agreement