TY - JOUR
T1 - Hub-and-spoke free trade areas
T2 - Theory and evidence from Israel
AU - Deltas, George
AU - Desmet, Klaus
AU - Facchini, Giovanni
PY - 2012/8
Y1 - 2012/8
N2 - We study how the sequential formation of free trade areas affects trade flows between member countries. In a three-country, three-good model of comparative advantage if two countries have an FTA, and both sign a similar agreement with the third, trade between the two decreases. However, if only one of them signs an additional FTA, a hub- and-spoke pattern arises, and trade between the initial members increases. Israel's experience lends strong support to our model: trade between Israel and the EU, subject to an FTA since 1975, increased by an additional 29% after the introduction of the US-Israel FTA in 1985.
AB - We study how the sequential formation of free trade areas affects trade flows between member countries. In a three-country, three-good model of comparative advantage if two countries have an FTA, and both sign a similar agreement with the third, trade between the two decreases. However, if only one of them signs an additional FTA, a hub- and-spoke pattern arises, and trade between the initial members increases. Israel's experience lends strong support to our model: trade between Israel and the EU, subject to an FTA since 1975, increased by an additional 29% after the introduction of the US-Israel FTA in 1985.
UR - http://www.scopus.com/inward/record.url?scp=84865198859&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=84865198859&partnerID=8YFLogxK
U2 - 10.1111/j.1540-5982.2012.01722.x
DO - 10.1111/j.1540-5982.2012.01722.x
M3 - Article
AN - SCOPUS:84865198859
SN - 0008-4085
VL - 45
SP - 942
EP - 977
JO - Canadian Journal of Economics
JF - Canadian Journal of Economics
IS - 3
ER -