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Do Free Trade Agreements Increase The New Goods Margin? Evidence from Korea

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  • Sang-Wook (Stanley) Cho

    (School of Economics, UNSW Business School, UNSW)

Abstract
This paper analyzes the role of the new goods margin, or the extensive margin, in the growth of trade between Korea and countries with which it has signed free trade agreements (FTAs). Using a methodology developed by Kehoe and Ruhl (2013), I look at the set of least-tradedgoods (or “new” goods) that constitutes the bottom decile of total trade value in 1995, and calculate its share of trade in 2013, when most of the bilateral trade agreements have come into full effect. On average, these new goods account for 26 percent of Korea’s exports and 31 percent of its imports post-FTA. When compared to a control group of main trade partners with no FTAs, I find that FTAs have more impact on the growth of new goods in imports rather than in exports. This difference may be due to the fact that Korea’s tariff barriers were relatively higher than those of its FTA partner countries. Despite rapid growth at the extensive margin, the main avenue of growth in trade came from growth along the intensive margin.

Suggested Citation

  • Sang-Wook (Stanley) Cho, 2016. "Do Free Trade Agreements Increase The New Goods Margin? Evidence from Korea," Discussion Papers 2016-02, School of Economics, The University of New South Wales.
    • Handle: RePEc:swe:wpaper:2016-02a
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    File URL: http://research.economics.unsw.edu.au/RePEc/papers/2016-02.pdf
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    References listed on IDEAS

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    Cited by:

    1. Chingunjav Amarsanaa & Yoshinori Kurokawa, 2021. "The Extensive Margin of International Trade in a Transition Economy: The Case of Mongolia," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 63(4), pages 648-673, December.
    2. Soonchan Park & Innwon Park, 2023. "Firm size‐specific trade effects of regional trade agreements: Estimating extensive and intensive margins of trade," Asian Economic Journal, East Asian Economic Association, vol. 37(1), pages 82-112, March.

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    More about this item

    Keywords

    Free trade agreement; Extensive margin; Intensive margin; Korea;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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