Chile - Korea FTA: extensive and intensive margins analysis
AbstractThis paper analyzes the impact of the Chile-Korea Free Trade Agreement (CKFTA) over the bilateral extensive and intensive margins of trade. For this purpose, it defines as extensive margin those trade flows established after the entry into force of the agreement (i.e. products not traded before 2004), while the intensive margin refers to the growth of exports of existing products in the bilateral relation. To estimate these effects, a Poisson-Pseudo Maximum Likelihood model is proposed. Using disaggregated product data (6-digit HS system) for the period 1996-2017, the paper tests the impact of the agreement on bilateral flows, as well as differentiated this effect between intensive and extensive margin. It is found that the CKFTA had a positive effect over bilateral trade flows, and although new products were added to the bilateral export basket (extensive margin), the impact is stronger on goods already been traded (intensive margin).
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