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Machine learning in international trade research - evaluating the impact of trade agreements

Breinlich, Holger, Corradi, Valentina, Rocha, Nadia, Ruta, Michele, Silva, J.M.C. Santos and Zylkin, Tom (2021) Machine learning in international trade research - evaluating the impact of trade agreements. CEP Discussion Papers (1776). Centre for Economic Performance, LSE, London, UK.

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Modern trade agreements contain a large number of provisions in addition to tariff reductions, in areas as diverse as services trade, competition policy, trade-related investment measures, or public procurement. Existing research has struggled with overfitting and severe multicollinearity problems when trying to estimate the effects of these provisions on trade flows. Building on recent developments in the machine learning and variable selection literature, this paper proposes data-driven methods for selecting the most important provisions and quantifying their impact on trade flows, without the need of making ad hoc assumptions on how to aggregate individual provisions. The analysis finds that provisions related to antidumping, competition policy, technical barriers to trade, and trade facilitation are associated with enhancing the trade-increasing effect of trade agreements.

Item Type: Monograph (Discussion Paper)
Official URL:
Additional Information: © 2021 The Authors
Divisions: Centre for Economic Performance
Subjects: H Social Sciences > HF Commerce
H Social Sciences > HB Economic Theory
JEL classification: F - International Economics > F1 - Trade > F14 - Country and Industry Studies of Trade
F - International Economics > F1 - Trade > F15 - Economic Integration
F - International Economics > F1 - Trade > F17 - Trade Forecasting and Simulation
Date Deposited: 17 Mar 2022 12:09
Last Modified: 18 Mar 2022 00:04

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