Unpublished Paper
The Cobden-Chevalier effect: Evaluating the causal effect of the Most Favoured Nation clause in presence of Network interdependence
Trade, History, Gravity, Causality
(2014)
Abstract
The purpose of this work is to evaluate the causal effect of the Network of the Cobden-Chevalier Treaties including the Most Favoured Nation (MFN) clause on trade flows of countries in the second half of the 19th century. This paper contributes to the literature on the topic in several ways. First, it applies up-to-date quantitative methods (i.e., nonparametric matching technique) to the study of historical phenomena. These methods permit to estimate the average MFN effect (the ``treatment") on the treated group of countries in terms of bilateral trade flows (the ``outcome"), rebalancing the control group without imposing any functional relationship between covariates and the probability (propensity score) of signing a PTA including a MFN clause. Second, it describes Preferential Trade Agreements (PTAs) and their evolution through the lens of Network Analysis. Third, it addresses selection bias on unobservables by including fixed effectsin the matching procedure. Lastly, controls for network interdependence and trade policy externalities. The outcomes of our preliminary estimates show that the Network of the Cobden-Chevalier Treaties including MFN clause had an impact on trade flows of countries in the second half of the 19th century. The effect on trade flows is positive when all observations are taking into account (27 per cent more than the average trade flows of 1865, on average). Last but not least, the empirical results show that the network structure of PTAs matters and should be taken into consideration in evaluation exercises.
Keywords
- International trade flows,
- Preferential Trade Agreements,
- Network Analysis,
- Matching econometrics,
- Economic History
Disciplines
Publication Date
Summer 2014
Citation Information
Luca De Benedictis and Silvia Nenci. "The Cobden-Chevalier effect: Evaluating the causal effect of the Most Favoured Nation clause in presence of Network interdependence" Trade, History, Gravity, Causality (2014) Available at: http://works.bepress.com/luca_de_benedictis/37/