Regional Cooperation and Bilateral Trade Flows: An Empirical Measurement of Resistance

Drawing on the procedures developed for estimating stochastic frontier production functions, the methodology suggested in this paper to work out the impact of country-specific resistance to bilateral trade flows between two countries is the estimation of a stochastic frontier gravity type model. The...

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Bibliographic Details
Published inThe International trade journal Vol. 21; no. 2; pp. 85 - 107
Main Author Kalirajan, Kaliappa
Format Journal Article
LanguageEnglish
Published Laredo Taylor & Francis Group 01.04.2007
Taylor & Francis Ltd
Subjects
Cooperation
Estimating techniques
International trade
Stochastic models
Studies
Australia
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Summary:Drawing on the procedures developed for estimating stochastic frontier production functions, the methodology suggested in this paper to work out the impact of country-specific resistance to bilateral trade flows between two countries is the estimation of a stochastic frontier gravity type model. The workability of the suggested method is demonstrated using trade data from the recently formed Indian Ocean Rim-Association for Regional Cooperation (IOR-ARC) countries. The role of the regional cooperation towards reducing trade restrictiveness among its member countries is examined by considering Australia's exports to other member countries of IOR-ARC. The empirical analysis indicates that on average, Australia has been able to achieve more (about 15%) of its potential exports with IOR-ARC countries due to regional cooperation.
ISSN:0885-3908
1521-0545
DOI:10.1080/08853900701266555