UNIVERSITY OF ECONOMICS INSTITUTE OF SOCIAL STUDIES HO CHI MINH CITY THE HAGUE VIETNAM THE NETHERLANDS VIETNAM - NETHERLANDS PROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS THE IMPACT OF FREE TRADE AGREEMENT ON TRADE FLOW OF GOODS IN VIETNAM BY NGUYEN QUANG HUY MASTER OF ARTS IN DEVELOPMENT ECONOMICS HO CHI MINH CITY, DECEMBER 2014 UNIVERSITY OF ECONOMICS INSTITUTE OF SOCIAL STUDIES HO CHI MINH CITY THE HAGUE VIETNAM THE NETHERLANDS VIETNAM - NETHERLANDS PROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS THE IMPACT OF FREE TRADE AGREEMENT ON TRADE FLOW OF GOODS IN VIETNAM A thesis submitted in partial fulfilment of the requirements for the degree of MASTER OF ARTS IN DEVELOPMENT ECONOMICS By NGUYEN QUANG HUY Academic Supervisor: Assc Prof Dr NGUYEN TRONG HOAI HO CHI MINH CITY, DECEMBER 2014 ACKNOWLEGDEMENT I would like to acknowledge and send heartfelt gratitude to Assc Prof Dr Nguyen Trong Hoai who is my academic supervisor His advice and recommendation have helped me to overcome my insufficient knowledge in trade theories and econometric techniques Therefore, I can continue our work and finish this study This thesis cannot be completed without the fine guidance from the VNP Scientific Committee I would like to thank sincerely to Dr Truong Dang Thuy I would like to address my deep gratitude to Dr Pham Khanh Nam, Dr Nguyen Minh Duc, Dr Pham Thi Thu Tra, and Dr Dinh Cong Khai for their supporting comments I would like to give a great thank to Ms Xuan Hong, Mr Tam, Mr Huy, and Mr Quy in supporting and providing information, lab room for my writing and preparation On my writing process, I received great support from Ms Yen, Mr Anh, and Mr Chinh, my classmates at class 19 Without their support and sharing, it is really difficult to cope with the huge pressure in finishing thesis on time ABSTRACT This study devotes to analyze the effect of free trade agreement on Vietnam’s trade flow of goods by establishing gravity model for 184 trading partners between 1990 and 2012 Basing on the theoretical foundation and previous empirical papers, the FTA is expected to have positive relationship with trade flow of member countries In details, two countries being in a same FTA will trade much more than those without in a same FTA The results from the current study also find out that FTA’s estimated coefficients are consistently positive Relating to the methodology, two main problems discussed in gravity model are endogeneity of FTA and zero-value in trade Firstly, the thesis points out that FTA is exogenous variable in the gravity model Secondly, sample selection model, Poisson Pseudo Maximum Likelihood, and Fixed-effect model are used to solve the zero problems in model The empirical results from all estimation models are consistent with each other in term of sign of FTA’s coefficient For policy implication, the thesis proposes that FTA is a good trade policy for Vietnam because it can help to improve the total bilateral trade value among FTA members However, FTA does not impact on trade flow only, but it also has effect on other aspects of Vietnam economy such as wage structural, investment Those issues are beyond the objective of this study Key words: Free Trade Agreement, gravity model, total bilateral trade TABLE OF CONTENTS CHAPTER INTRODUCTION 1.1 Problem Statement 1.2 Research Objectives 1.3 Research questions CHAPTER LITERATURE REVIEW 2.1 Theoretical literature 2.1.1 Trade Theories 2.1.2 Free Trade Agreement 2.1.3 The role of free trade agreement 2.2 EMPIRICAL LITERATURE 16 2.2.1 Trade Flow 16 2.2.2 Free Trade Agreement 18 2.2.3 Control ling factors 19 2.2.4 Conceptual Framework 21 2.2.5 Empirical study on estimation model 24 CHAPTER OVERVIEW OF VIETNAM’S FREE TRADE AGREEMENT 26 3.1 ASEAN Free Trade Agreement (AFTA) 26 3.2 ASEAN-People’s Republic of China Comprehensive Economic Cooperation Partnership (ACFTA) 28 3.3 ASEAN- Australia and New Zealand Free Trade Agreement (AANZFTA) 31 3.4 ASEAN-India Free Trade Agreement (AIFTA) 33 3.5 ASEAN-Republic of Korea Comprehensive Economic Cooperation Agreement (AKFTA) 34 3.6 Japan-Vietnam Economic Partnership Agreement (VJEPA) 37 CHAPTER RESEARCH METHODOLOGY 39 4.1 Model Specification and Estimation Method 39 4.1.1 Model for solving endogenous problem 41 4.1.2 Model for Solving Heteroscedasticity and Zero-Trade Value 44 4.1.3 Log-form gravity model: 45 4.1.4 Multiplicative-form gravity model 49 4.2 Variable Definition 51 4.2.1 Dependent Variable in Model Specification 51 4.2.2 Independent variables in the Model Specification 51 4.3 Data Collection 56 4.3.1 Sources of data 56 4.3.2 Sample Selection 56 CHAPTER EMPIRICAL RESULT 60 5.1 Testing Results 60 5.1.1 Endogenous testing for FTA 60 5.1.2 Testing for Multi-collinearity 60 5.2 Empirical Results 60 5.2.1 Log-form gravity model 60 5.2.2 Multiplicative-Form Gravity Model 66 CHAPTER CONCLUSION 70 6.1 Conclusion 70 6.2 Policy Implication 72 6.3 Limitation 72 REFERENCE 74 APPENDICE 80 LIST OF TABLES Table 3-1:ACFTA's Tariff Elimination schedule for Vietnam 29 Table 3-2: Preferential Tariff Rate commitment by Vietnam for AKFTA 35 Table 4-1: Model Specifications Summary 50 Table 4-2: Variable Definition 58 Table 4-3: Variables Descriptive Statistics 59 Table 5-1: Testing endogeneity of FTA 60 Table 5-2: Regression Result for Fixed-Effect Model 62 Table 5-3: Regression Result for Sample Selection Model 65 Table 5-4: Testing Results for Collinearity Problem in sample selection model 66 Table 5-5: Testing results for Interaction Terms in Sample Selection Model 66 Table 5-6: Regression Results for PPML model Dependent variable Tvjt 67 LIST OF FIGURES Figure 1-1: Trade share of FTA countries and non-FTA countries Figure 1-2: Trade share among Vietnam FTAs Figure 1-3: Trade Share of FTA countries, EU, and USA Figure 2-1: The Relationship Between FTA and Trade Flow 13 Figure 2-2: Conceptual Framework 23 Figure 3-1: Trade Pattern between Vietnam and ASEAN Members, 1990-2012 26 Figure 3-2: Change in Trade Flow Vietnam and ASEAN Countries, Excluding Brunei 27 Figure 3-3: Trade Pattern between Vietnam and ACFTA members, 1990-2012 30 Figure 3-4: Change in Trade Flow between Vietnam and ACFTA Members 31 Figure 3-5: Trade between Vietnam and Australia-New Zealand, 1990-2012 32 Figure 3-6: Change In Trade Flow Between Vietnam And AANZFTA Members 33 Figure 3-7: Trade between Vietnam and India, 1990-2012 33 Figure 3-8: Change in Trade between Vietnam and India, 1990-2012 34 Figure 3-9: Trade between Vietnam-Korea, 1990-2012 36 Figure 3-10: Change In Trade Flow Between Vietnam And AKFTA Members 36 Figure 3-11: Trade Between Vietnam and Japan, 1990-2012 37 Figure 3-12: Change in Trade Flow Between Vietnam and Japan 38 Figure 4-1: Total Bilateral Trade between Vietnam and US 43 Figure 4-2: ASEAN Trade Balance with China 44 ABBREVATION ACFTA ASEAN Free Trade Agreement AFTA ASEAN Free Trade Agreement AJFTA ASEAN-Japan Free Trade Agreement AIFTA ASEAN-India Free Trade Agreement AKFTA ASEAN-Korea Free Trade Agreement ASEAN Association of Southeast Asian Nation BTA Bilateral Trade Agreement CER Closer Economic Relation EEC European Economic Community EMU Economic and Monetary Union FTA Free Trade Agreement NFTA North America Free Trade Agreement TPP Trans-Pacific Partnership VJEPA Vietnam-Japan Economic Partnership Agreement USA the United States of America CHAPTER INTRODUCTION 1.1 Problem Statement According to World Trade Organization, Vietnam is now official member of eight free trade agreements which are signed and into force; and, Vietnam is also launching negotiation with a number of countries and economic groups to establish free trade agreement such as TPP, ASEAN-EU FTA In 2012, trade balances between Vietnam and other members of ASEAN Free Trade Agreement (AFTA), recorded at US $3.443 billion, and Vietnam – China trade balance, members of ACFTA, is – US $16.397 billion (Customs Handbook on International Merchandise Trade Statistics of Vietnam, 2012) In stark contrast, the net export of Vietnam to the Australia and New Zealand, members of ASEAN-ANZ FTA, is US $ 1.2258 billion in 2012(computed base on Customs Handbook on International Merchandise Trade Statistics of Vietnam, 2012 It can be observed that trade patterns of Vietnam among FTA partner are different As can be seen from the Figure 1-1, share of FTA countries was around 50 percent of Vietnam total trade over the period of 1990-2012, thus the FTA-trading partners play essential role in the trade of Vietnam However, from 2000 afterwards, the share of non-FTA countries gradually rose; this can be explained by the increase in trade between Vietnam and European countries and the United States of America presented in Figure 1-2 100.00% 80.00% 60.00% 40.00% 20.00% 0.00% 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Percentage Figure 1-1: Trade share of FTA countries and non-FTA countries Year Share of FTA countries Page | Non-FTA share Source: Author’s Construction Figure 1-2: Trade Share of FTA countries, EU, and USA 80% 70% 60% 50% 40% 30% 20% 10% 0% Share of FTA countries US share EU share Other Source: Author’s Construction Furthermore, among Vietnam FTAs, AFTA share was decreasing from around 30 percent in 1996 to 15 percent in 2012 The decreasing trend can be attributed from the increase in share of AFTA plus For instance, the trade between Vietnam and China, member of ASEAN- China FTA, increased nearly three times from 2000 to 2012 Another positive change after signing FTA is with Korea to establish ASEANKorea FTA Yet, the change in trade share of other AFTA plus are not significantly Therefore, a question posed is that whether the impact of FTA on Vietnam trade flow is significant or not Figure 1-3: Trade share among Vietnam FTAs 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% Non-FTA share China Share ASEAN share AANZ share India Share Korea Share Japan share Source: Author’s Construction Page | APPENDICE Appendix 1: List of 184 Countries in the data set Appendix 2: Testing Results Appendix 3: Regression Results Page | 80 APPENDIX 1: LIST OF 184 COUNTRIES IN DATA SET Afghanistan, Islamic Republic of Albania Bosnia and Herzegovina Botswana China, P.R.: Mainland Denmark Algeria Brazil Dominica American Samoa Brunei Darussalam Antigua and Barbuda Angola Argentina Armenia, Republic of Aruba Australia Bulgaria Burkina Faso Burundi Cabo Verde Cambodia Cameroon Dominican Republic Ecuador Egypt El Salvador Equatorial Guinea Eritrea Estonia Austria Canada Ethiopia Colombia Guatemala Kuwait Morocco Russian Federation Tajikistan Guinea Kyrgyz Republic Lao People's Democratic Republic Mozambique Rwanda Myanmar Samoa Tanzania Timor-Leste, Dem Rep of Guyana Latvia Namibia Saudi Arabia Togo Haiti Honduras Hungary Iceland India Indonesia Iran, Islamic Republic of Lebanon Lesotho Liberia Libya Lithuania Luxembourg Nepal Netherlands New Zealand Nicaragua Niger Nigeria Senegal Seychelles Sierra Leone Singapore Slovak Republic Slovenia Tonga Tunisia Turkey Turkmenistan Tuvalu Thailand Macedonia, FYR Norway Solomon Islands Trinidad and Tobago European Union Iraq Madagascar Oman South Africa Uganda Fiji Ireland Malawi Pakistan Spain Ukraine Finland Israel Malaysia Palau Sri Lanka United Arab Emirates Bangladesh Barbados Comoros Congo, Democratic Republic of Congo, Republic of Costa Rica France Gabon Italy Jamaica Maldives Mali Panama Papua New Guinea United Kingdom United States Belarus Cote d'Ivoire Gambia, The Japan Malta Paraguay Belgium Belize Croatia Cuba Georgia Germany Jordan Jordan Mauritania Mauritius Peru Poland St Kitts and Nevis St Lucia St Vincent and the Grenadines Sudan Suriname Benin Cyprus Ghana Kazakhstan Mexico Portugal Swaziland Bermuda Bhutan Czech Republic Chad Greece Greenland Kenya Kiribati Moldova Montenegro Philippines Qatar Bolivia Chile Grenada Korea, Republic of Mongolia Romania Sweden Switzerland Syrian Arab Republic Azerbaijan, Republic of Bahamas, The Bahrain, Kingdom of Guinea-Bissau Uruguay Uzbekistan Vanuatu Venezuela, Republica Bolivariana de Yemen, Republic of Zambia Zimbabwe Source: Author’s construction Page | 81 APPENDIX 2: TESTING RESULTS Multi-collinearity testing collin fta ldist lshare_gdp newdum97 newdum08 wto2 wtov wtop preer_vn preer_p ervp ervvn,c > orr (obs=2522) Collinearity Diagnostics SQRT RVariable VIF VIF Tolerance Squared -fta 1.65 1.28 0.6058 0.3942 ldist 1.73 1.31 0.5793 0.4207 lshare_gdp 1.10 1.05 0.9126 0.0874 newdum97 1.55 1.24 0.6466 0.3534 newdum08 1.63 1.28 0.6120 0.3880 wto2 4.51 2.12 0.2218 0.7782 wtov 1.49 1.22 0.6725 0.3275 wtop 2.66 1.63 0.3758 0.6242 preer_vn 2.73 1.65 0.3656 0.6344 preer_p 1.04 1.02 0.9661 0.0339 ervp 1.02 1.01 0.9830 0.0170 ervvn 1.21 1.10 0.8265 0.1735 -Mean VIF 1.86 Cond Eigenval Index 2.7884 1.0000 1.6514 1.2994 1.2613 1.4869 1.1276 1.5725 1.0697 1.6145 0.9652 1.6997 0.9127 1.7479 0.8937 1.7664 0.5012 2.3587 10 0.4086 2.6124 11 0.2880 3.1116 12 0.1322 4.5918 Condition Number 4.5918 Eigenvalues & Cond Index computed from deviation sscp (no intercept) Det(correlation matrix) 0.0430 Page | 82 Endogenous testing results for FTA IV (2SLS) estimation Estimates efficient for homoskedasticity only Statistics consistent for homoskedasticity only Total (centered) SS Total (uncentered) SS Residual SS = = = lttradep Coef fta ldist lshare_gdp newdum97 newdum08 wto2 wtov wtop preer_vn preer_p ervvn ervp _cons 5.389027 -1.663892 2.77797 4.572327 -.2072386 -2.593355 -3.686458 1260358 4.962897 -.4747274 -15.11025 4620033 -23.06476 Number of obs F( 12, 2101) Prob > F Centered R2 Uncentered R2 Root MSE 174619.3846 410828.8714 72929.92512 Std Err .7712312 2831723 059883 4613393 4830363 6102038 8381592 4692927 2.512641 6872242 21.49056 5.068956 2.744798 z 6.99 -5.88 46.39 9.91 -0.43 -4.25 -4.40 0.27 1.98 -0.69 -0.70 0.09 -8.40 P>|z| 0.000 0.000 0.000 0.000 0.668 0.000 0.000 0.788 0.048 0.490 0.482 0.927 0.000 = = = = = = 2114 243.93 0.0000 0.5823 0.8225 5.874 [95% Conf Interval] 3.877441 -2.218899 2.660602 3.668119 -1.153972 -3.789332 -5.32922 -.793761 0382102 -1.821662 -57.23097 -9.472968 -28.44446 6.900612 -1.108885 2.895339 5.476536 7394951 -1.397378 -2.043696 1.045833 9.887583 8722072 27.01047 10.39697 -17.68505 Underidentification test (Anderson canon corr LM statistic): Chi-sq(7) P-val = 1698.479 0.0000 Weak identification test (Cragg-Donald Wald F statistic): Stock-Yogo weak ID test critical values: 5% maximal IV relative 10% maximal IV relative 20% maximal IV relative 30% maximal IV relative 10% maximal IV size 15% maximal IV size 20% maximal IV size 25% maximal IV size Source: Stock-Yogo (2005) Reproduced by permission 1223.358 19.86 11.29 6.73 5.07 31.50 17.38 12.48 9.93 bias bias bias bias Sargan statistic (overidentification test of all instruments): Chi-sq(6) P-val = -endog- option: Endogeneity test of endogenous regressors: Chi-sq(1) P-val = Regressors tested: fta 7.454 0.2809 1.524 0.2170 Instrumented: fta Included instruments: ldist lshare_gdp newdum97 newdum08 wto2 wtov wtop preer_vn preer_p ervvn ervp Excluded instruments: L2.fta L3.fta L4.fta L5.fta L6.fta L7.fta L8.fta Tests of endogeneity of: fta H0: Regressor is exogenous Wu-Hausman F test: Durbin-Wu-Hausman chi-sq test: 1.51488 F(1,2100) 1.52388 Chi-sq(1) Page | 83 P-value = 0.21853 P-value = 0.21703 Hausman Test for Fixed-effect model and Random-effect model Coefficients (b) (B) fe re fta lshare_gdp newdum97 newdum08 wto2 wtov wtop preer_vn preer_p ervvn ervp 7bn.yd 8.yd 9.yd 11.yd 12.yd 13.yd 14.yd 15.yd 16.yd 17.yd 18.yd 19.yd 3.352236 -2.593674 6.285419 -1.359668 2.165702 3.299157 -1.036612 4.947552 -.0184599 45.60213 -7.918674 3.580106 -.9535711 -1.34858 7.018371 1.534641 1.867354 2.567053 2.998296 2.651848 3.264545 709409 5934123 3.159621 2.533258 5.260213 -.7001713 -2.291528 -2.165607 -1.153475 -4.705294 -.4253923 -2.900802 -5.164085 2.959221 -.1735713 -.0326087 5.777588 -.1830332 -.4752101 -.9677114 -1.140326 -1.12662 -1.165216 0392298 1.384069 (b-B) Difference sqrt(diag(V_b-V_B)) S.E .1926154 -5.126932 1.025206 -.6594969 4.45723 5.464764 1168639 9.652846 4069324 48.50293 -2.75459 6208849 -.7799999 -1.315971 1.240783 1.717674 2.342564 3.534764 4.138622 3.778468 4.429761 6701792 -.790657 3238689 7343078 1018274 0712988 6649496 7370871 1644639 1.072313 0785249 3200896 0827701 1378854 1428009 2182625 3128425 4832576 5687016 5221707 6153692 b = consistent under Ho and Ha; obtained from areg B = inconsistent under Ha, efficient under Ho; obtained from xtreg Test: Ho: difference in coefficients not systematic chi2(23) = (b-B)'[(V_b-V_B)^(-1)](b-B) = 51.03 Prob>chi2 = 0.0007 (V_b-V_B is not positive definite) Page | 84 Testing Results for Collinearity in Sample Selection Model Collinearity Diagnostics SQRT RVariable VIF VIF Tolerance Squared -lambda 2.75 1.66 0.3635 0.6365 fta 1.41 1.19 0.7103 0.2897 ldist 1.52 1.23 0.6576 0.3424 lshare_gdp 2.37 1.54 0.4215 0.5785 newdum97 1.74 1.32 0.5755 0.4245 newdum08 1.70 1.30 0.5873 0.4127 wto2 4.69 2.16 0.2134 0.7866 wtov 1.56 1.25 0.6399 0.3601 wtop 2.65 1.63 0.3774 0.6226 preer_vn 2.73 1.65 0.3669 0.6331 preer_p 1.04 1.02 0.9651 0.0349 ervvn 1.22 1.11 0.8170 0.1830 ervp 1.02 1.01 0.9806 0.0194 -Mean VIF 2.03 Cond Eigenval Index 2.8957 1.0000 1.8056 1.2664 1.4715 1.4028 1.2362 1.5305 1.0643 1.6495 1.0101 1.6932 0.9764 1.7221 0.8968 1.7969 0.5475 2.2999 10 0.4376 2.5723 11 0.3223 2.9975 12 0.2108 3.7067 13 0.1253 4.8071 Condition Number 4.8071 Eigenvalues & Cond Index computed from deviation sscp (no intercept) Det(correlation matrix) 0.0183 Note: Lambda variable is the inverse Mill ratio Page | 85 APPENDIX 3: REGRESSION RESULTS Fixed-Effect Model Equation (1A) Linear regression, absorbing indicators Number of obs F( 25, 168) Prob > F R-squared Adj R-squared Root MSE = = = = = = 3456 24.50 0.0000 0.7782 0.7651 4.2399 (Std Err adjusted for 169 clusters in id) Robust Std Err lttradep Coef t P>|t| fta ldist lshare_gdp newdum97 newdum08 wto2 wtov wtop preer_vn preer_p 1.335555 -1.392788 9.788347 -1.32846 5.802764 4.241696 1281658 -.9262809 -.3130577 7489637 (omitted) 9927577 8140144 4130339 1.349168 1.586394 6299912 1.870313 3363267 yd 10 11 12 13 14 15 16 17 18 19 20 21 22 23 1.643904 2.134772 2.989446 6.564171 -.8968936 -.595775 10.38063 4.114134 4.293924 4.4184 4.659791 4.846069 5.090607 -.1778624 1.545084 -.2902009 0 _cons 27.67921 id absorbed [95% Conf Interval] 1.78 0.076 -.1430378 2.814148 -1.40 12.02 -3.22 4.30 2.67 0.20 -0.50 -0.93 0.162 0.000 0.002 0.000 0.008 0.839 0.621 0.353 -3.352676 8.181332 -2.143866 3.139257 1.10986 -1.115553 -4.618625 -.9770289 5670994 11.39536 -.5130548 8.466271 7.373532 1.371885 2.766063 3509136 4816209 4855482 6682967 7710039 3118732 2754607 (omitted) 8594023 8953139 9306753 9850758 1.055503 1.110976 1.175928 5719513 393549 (omitted) 1448801 (omitted) (omitted) 3.41 4.40 4.47 8.51 -2.88 -2.16 0.001 0.000 0.000 0.000 0.005 0.032 6930948 1.17621 1.670104 5.042067 -1.512589 -1.139585 2.594712 3.093334 4.308787 8.086276 -.2811981 -.0519646 12.08 4.60 4.61 4.49 4.41 4.36 4.33 -0.31 3.93 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.756 0.000 8.684007 2.346618 2.456599 2.473678 2.576032 2.652796 2.769108 -1.307 7681456 12.07725 5.881649 6.13125 6.363122 6.74355 7.039342 7.412106 9512755 2.322023 -2.00 0.047 -.5762211 -.0041807 16.29746 1.70 0.091 -4.494985 59.85341 (169 categories) Page | 86 Equation (2A) Linear regression, absorbing indicators Number of obs F( 23, 143) Prob > F R-squared Adj R-squared Root MSE = = = = = = 2522 19.31 0.0000 0.7997 0.7856 4.0770 (Std Err adjusted for 144 clusters in id) Robust Std Err lttradep Coef t P>|t| [95% Conf Interval] fta ldist lshare_gdp newdum97 newdum08 wto2 wtov wtop preer_vn preer_p ervvn ervp 3.352236 -2.593674 6.285419 -1.359668 2.165702 3.299157 -1.036612 4.947552 -.0184599 45.60213 -7.918674 9180137 (omitted) 1.703383 6593873 4892408 1.834444 1.926699 9325941 4.2021 1.220325 21.86572 5.848783 3.65 0.000 1.537606 5.166866 -1.52 9.53 -2.78 1.18 1.71 -1.11 1.18 -0.02 2.09 -1.35 0.130 0.000 0.006 0.240 0.089 0.268 0.241 0.988 0.039 0.178 -5.960737 4.982014 -2.326747 -1.460429 -.5093327 -2.880063 -3.358707 -2.430668 2.380322 -19.47992 7733891 7.588825 -.3925897 5.791832 7.107647 8068399 13.25381 2.393748 88.82393 3.64257 yd 10 11 12 13 14 15 16 17 18 19 20 21 22 23 3.580106 -.9535711 -1.34858 7.018371 1.534641 1.867354 2.567053 2.998296 2.651848 3.264545 709409 5934123 0 0 5859584 400145 5847561 (omitted) 7530738 8225323 9753324 1.333653 1.520472 1.374443 1.588001 7876892 4690649 (omitted) (omitted) (omitted) (omitted) 6.11 -2.38 -2.31 0.000 0.018 0.023 2.421846 -1.744535 -2.504463 4.738365 -.1626076 -.192697 9.32 1.87 1.91 1.92 1.97 1.93 2.06 0.90 1.27 0.000 0.064 0.058 0.056 0.051 0.056 0.042 0.369 0.208 5.529775 -.0912523 -.0605776 -.0691693 -.0072099 -.0650022 1255558 -.8476101 -.3337846 8.506966 3.160534 3.795286 5.203275 6.003801 5.368699 6.403533 2.266428 1.520609 _cons 52.60005 28.34794 1.86 0.066 -3.435106 108.6352 id absorbed (144 categories) Page | 87 Sample Selection Model Equation (1B) Linear regression Number of obs F( 30, 161) Prob > F R-squared Root MSE = = = = = 1846 101.17 0.0000 0.7763 1.4891 (Std Err adjusted for 162 clusters in id) lttrade Coef fta ldist lshare_gdp newdum97 newdum08 wto2 wtov wtop preer_vn preer_p msum_ldist msum_lshare_gdp sum_preer_p msum_ervp lambda _Iyd_2 _Iyd_3 _Iyd_4 _Iyd_5 _Iyd_6 _Iyd_7 _Iyd_8 _Iyd_9 _Iyd_10 _Iyd_11 _Iyd_12 _Iyd_13 _Iyd_14 _Iyd_15 _Iyd_16 _Iyd_17 _Iyd_18 _Iyd_19 _Iyd_20 _Iyd_21 _Iyd_22 _Iyd_23 _cons 1.296648 -1.300677 1.032145 -.6400853 -.1983234 4882216 3429761 -.0298544 0308467 -.0157057 5.490597 7762875 -2.382332 -2.264381 -1.821067 -2.104194 -1.636874 -.6434229 -.6034751 -.5755815 -.4415661 -.5046094 -.3814933 -.1698823 -.2354183 -.1620618 -.2801832 1185459 -.1609765 -.0461141 9.484002 Robust Std Err .4637278 2385703 0924858 3937639 115042 3575277 (omitted) 232698 (omitted) 2394039 (omitted) 0806328 0159413 4.952649 1877681 (omitted) 5084076 4975805 4696246 4234533 4055584 1402055 1444088 (omitted) 4015249 3928977 3874687 3783173 3629117 3668296 3490074 1345376 0960152 (omitted) 0951197 0804436 (omitted) 2.490072 t P>|t| [95% Conf Interval] 2.80 -5.45 11.16 -1.63 -1.72 1.37 0.006 0.000 0.000 0.106 0.087 0.174 3808742 -1.771807 8495032 -1.417693 -.4255091 -.2178269 2.212421 -.8295463 1.214787 137523 0288624 1.19427 1.47 0.142 -.1165579 8025101 -0.12 0.901 -.5026311 4429223 0.38 -0.99 1.11 4.13 0.703 0.326 0.269 0.000 -.1283876 -.0471867 -4.289935 4054815 190081 0157754 15.27113 1.147094 -4.69 -4.55 -3.88 -4.97 -4.04 -4.59 -4.18 0.000 0.000 0.000 0.000 0.000 0.000 0.000 -3.38634 -3.247007 -2.748485 -2.940433 -2.437774 -.9203018 -.8886547 -1.378325 -1.281755 -.8936482 -1.267956 -.8359737 -.366544 -.3182954 -1.43 -1.12 -1.30 -1.01 -0.47 -0.64 -0.46 -2.08 1.23 0.154 0.263 0.195 0.315 0.640 0.522 0.643 0.039 0.219 -1.368516 -1.217464 -1.269786 -1.128597 -.8865632 -.9598363 -.8512844 -.5458691 -.0710658 2173531 3343315 260567 3656108 5467987 4889997 5271607 -.0144973 3081575 -1.69 -0.57 0.093 0.567 -.3488197 -.2049747 0268667 1127465 3.81 0.000 4.566587 14.40142 Page | 88 Equation (2B) Linear regression Number of obs F( 50, 161) Prob > F R-squared Root MSE = = = = = 1846 73.11 0.0000 0.7815 1.4796 (Std Err adjusted for 162 clusters in id) lttrade Coef fta ldist lshare_gdp newdum97 newdum08 wto2 wtov wtop preer_vn preer_p msum_ldist msum_lshare_gdp sum_preer_p msum_ervp lambda _Iyd_2 _Iyd_3 _Iyd_4 _Iyd_5 _Iyd_6 _Iyd_7 _Iyd_8 _Iyd_9 _Iyd_10 _Iyd_11 _Iyd_12 _Iyd_13 _Iyd_14 _Iyd_15 _Iyd_16 _Iyd_17 _Iyd_18 _Iyd_19 _Iyd_20 _Iyd_21 _Iyd_22 _Iyd_23 lambda _IydXlamb_2 _IydXlamb_3 _IydXlamb_4 _IydXlamb_5 _IydXlamb_6 _IydXlamb_7 _IydXlamb_8 _IydXlamb_9 _IydXlamb_10 _IydXlamb_11 _IydXlamb_12 _IydXlamb_13 _IydXlamb_14 _IydXlamb_15 _IydXlamb_16 _IydXlamb_17 _IydXlamb_18 _IydXlamb_19 _IydXlamb_20 _IydXlamb_21 _IydXlamb_22 _IydXlamb_23 _cons 1.369136 -1.316936 1.038335 1.393378 -.2877516 2.610876 2.060827 3808253 0192195 0491406 -.0157745 6.543142 1.743486 0 4930287 4679752 341448 5011412 -.5696329 -.6157848 1.428055 1.630212 1.568381 1.691196 1.663135 1.830139 1.789071 -.3244553 -.0605053 0204229 0404988 0 -1.451514 -2.180753 -1.248079 -1.720218 -.8824274 -.5060997 1814546 2.150343 -.840095 -.8403519 -.8409447 -.2863398 -.8315169 -.5675364 -.7731801 -.2411753 -.6063327 -1.329928 -1.078389 -.8711259 7.00596 Robust Std Err .467239 239915 0915625 4687018 1344671 4579501 585213 234562 (omitted) 2393412 (omitted) 0797634 016196 4.640031 1.020624 (omitted) (omitted) 3415447 3541326 455353 4589936 1588306 1633341 (omitted) 4776548 4601765 4626951 4705444 4663765 476397 4682256 1501235 1285058 (omitted) 1074 0946573 (omitted) (omitted) (omitted) 1.081408 1.099756 1.041914 1.02959 9641565 9483944 9331713 (omitted) 1.46762 1.034336 9703766 1.020804 9567804 1.013943 9815378 9863969 1.00182 9996272 1.039092 1.039831 1.020721 2.559474 t P>|t| [95% Conf Interval] 2.93 -5.49 11.34 2.97 -2.14 5.70 3.52 1.62 0.004 0.000 0.000 0.003 0.034 0.000 0.001 0.106 4464285 -1.790722 8575171 4677818 -.5532983 1.706513 905144 -.0823897 2.291843 -.8431494 1.219154 2.318974 -.0222049 3.51524 3.216511 8440403 0.08 0.936 -.4534334 4918724 0.62 -0.97 1.41 1.71 0.539 0.332 0.160 0.090 -.1083768 -.0477585 -2.620029 -.2720505 2066579 0162095 15.70631 3.759023 1.44 1.32 0.75 1.09 -3.59 -3.77 0.151 0.188 0.454 0.277 0.000 0.000 -.1814565 -.2313686 -.5577868 -.4052832 -.8832928 -.9383383 1.167514 1.167319 1.240683 1.407566 -.255973 -.2932312 2.99 3.54 3.39 3.59 3.57 3.84 3.82 -2.16 -0.47 0.003 0.001 0.001 0.000 0.000 0.000 0.000 0.032 0.638 4847788 7214521 6546468 7619612 7421314 8893462 8644152 -.6209205 -.3142795 2.371332 2.538973 2.482115 2.620431 2.584139 2.770932 2.713727 -.0279901 193269 0.19 0.43 0.849 0.669 -.1916714 -.1464311 2325173 2274288 -1.34 -1.98 -1.20 -1.67 -0.92 -0.53 0.19 0.181 0.049 0.233 0.097 0.361 0.594 0.846 -3.587087 -4.35256 -3.305659 -3.753462 -2.786452 -2.378997 -1.66138 6840603 -.0089461 8095001 3130247 1.021597 1.366797 2.024289 1.47 -0.81 -0.87 -0.82 -0.30 -0.82 -0.58 -0.78 -0.24 -0.61 -1.28 -1.04 -0.85 2.74 0.145 0.418 0.388 0.411 0.765 0.413 0.564 0.434 0.810 0.545 0.202 0.301 0.395 0.007 -.747924 -2.88271 -2.756659 -2.856838 -2.175798 -2.83386 -2.505885 -2.721125 -2.219578 -2.580404 -3.381935 -3.131855 -2.886855 1.95149 5.04861 1.20252 1.075956 1.174948 1.603118 1.170826 1.370812 1.174764 1.737227 1.367739 722079 9750773 1.144603 12.06043 Page | 89 Equation (3B) Linear regression Number of obs F( 28, 135) Prob > F R-squared Root MSE = = = = = 1484 77.96 0.0000 0.8211 1.274 (Std Err adjusted for 136 clusters in id) lttrade Coef fta ldist lshare_gdp newdum97 newdum08 wto2 wtov wtop preer_vn preer_p ervvn ervp msum_ldist msum_lshare_gdp sum_preer_p msum_ervp lambda _Iyd_2 _Iyd_3 _Iyd_4 _Iyd_5 _Iyd_6 _Iyd_7 _Iyd_8 _Iyd_9 _Iyd_10 _Iyd_11 _Iyd_12 _Iyd_13 _Iyd_14 _Iyd_15 _Iyd_16 _Iyd_17 _Iyd_18 _Iyd_19 _Iyd_20 _Iyd_21 _Iyd_22 _Iyd_23 _cons 1.743394 -1.08774 1.096199 -1.023489 -.0628382 5481471 -.1002081 2519933 -.0360588 6546241 0350584 0015948 6.979234 1.051786 0 0 -1.809361 -1.318111 0569508 5991432 -.3181046 -.2745231 -.2998762 -.1719528 -.0523944 -.0461139 -.1911277 -.1447915 -.1631236 -.0446309 6.042155 Robust Std Err .4727272 227917 0811901 1658193 1183389 2667705 3821524 2561491 (omitted) 2312783 (omitted) 1.1279 (omitted) 0700253 0232155 4.173771 2512358 (omitted) (omitted) (omitted) (omitted) 2279423 1880823 (omitted) 128915 1443121 1723344 0816269 0733835 0617874 0556464 0475941 (omitted) 1256095 (omitted) 0805238 09457 0822952 (omitted) 2.344793 t P>|t| [95% Conf Interval] 3.69 -4.77 13.50 -6.17 -0.53 2.05 -0.26 0.98 0.000 0.000 0.000 0.000 0.596 0.042 0.794 0.327 8084856 -1.53849 9356303 -1.351429 -.2968762 0205572 -.8559879 -.2545907 2.678303 -.6369908 1.256769 -.6955498 1711998 1.075737 6555717 7585774 -0.16 0.876 -.4934561 4213384 0.58 0.563 -1.576015 2.885263 0.50 0.07 1.67 4.19 0.617 0.945 0.097 0.000 -.1034302 -.0443182 -1.2752 5549189 1735469 0475079 15.23367 1.548653 -7.94 -7.01 0.000 0.000 -2.260161 -1.69008 -1.358561 -.9461424 0.44 4.15 -1.85 -3.36 -4.09 -2.78 -0.94 -0.97 0.659 0.000 0.067 0.001 0.000 0.006 0.348 0.334 -.1980034 3137383 -.658929 -.435956 -.4450063 -.2941494 -.1624457 -.1402403 311905 8845481 0227197 -.1130902 -.1547462 -.0497563 057657 0480126 -1.52 0.130 -.4395446 0572892 -1.80 -1.72 -0.54 0.074 0.087 0.588 -.3040427 -.350154 -.2073854 0144598 0239067 1181236 2.58 0.011 1.404876 10.67943 Page | 90 Equation (4B) Page | 91 Linear regression Number of obs F( 45, 135) Prob > F R-squared Root MSE = = = = = 1484 64.18 0.0000 0.8236 1.2724 (Std Err adjusted for 136 clusters in id) lttrade Coef fta ldist lshare_gdp newdum97 newdum08 wto2 wtov wtop preer_vn preer_p ervvn ervp msum_ldist msum_lshare_gdp sum_preer_p msum_ervp lambda _Iyd_2 _Iyd_3 _Iyd_4 _Iyd_5 _Iyd_6 _Iyd_7 _Iyd_8 _Iyd_9 _Iyd_10 _Iyd_11 _Iyd_12 _Iyd_13 _Iyd_14 _Iyd_15 _Iyd_16 _Iyd_17 _Iyd_18 _Iyd_19 _Iyd_20 _Iyd_21 _Iyd_22 _Iyd_23 lambda _IydXlamb_2 _IydXlamb_3 _IydXlamb_4 _IydXlamb_5 _IydXlamb_6 _IydXlamb_7 _IydXlamb_8 _IydXlamb_9 _IydXlamb_10 _IydXlamb_11 _IydXlamb_12 _IydXlamb_13 _IydXlamb_14 _IydXlamb_15 _IydXlamb_16 _IydXlamb_17 _IydXlamb_18 _IydXlamb_19 _IydXlamb_20 _IydXlamb_21 _IydXlamb_22 _IydXlamb_23 _cons 1.826003 -1.07764 1.091062 -.8800561 -.232608 6351172 -.0047505 2123879 -.0226621 7881815 0489347 0019788 6.272927 1.932506 0 0 -1.337824 -1.170319 0718314 4569371 -.2509189 -.3224737 -.3001584 -.2187532 -.0933282 -.0302061 -.2630251 -.0701369 0111059 0380782 0 0 0 -1.833714 -1.068813 -1.23167 -1.387393 4810042 -.4662803 -.6013566 -.4682033 -.4834306 -.649201 -.5975078 -.7462875 -.4483104 -.6683245 -1.37881 -1.12984 -.9250308 5.730178 Robust Std Err .4728097 2241987 0799556 1819642 1418719 2753699 3870012 2596561 (omitted) 2258883 (omitted) 1.112988 (omitted) 0705144 0232209 4.225848 1.421376 (omitted) (omitted) (omitted) (omitted) 232594 2110419 (omitted) 1617651 1579654 1701274 0975418 0737006 0670652 0588811 0488222 (omitted) 1452026 (omitted) 0896741 1062676 095173 (omitted) (omitted) (omitted) (omitted) (omitted) (omitted) 1.411578 1.286975 1.052938 1.912748 (omitted) 1.07218 1.392882 1.379366 1.37259 1.390985 1.38051 1.393096 1.414843 1.407239 1.394282 1.434277 1.422 1.409634 2.330192 t P>|t| [95% Conf Interval] 3.86 -4.81 13.65 -4.84 -1.64 2.31 -0.01 0.82 0.000 0.000 0.000 0.000 0.103 0.023 0.990 0.415 8909314 -1.521036 9329344 -1.239925 -.513187 0905202 -.7701199 -.301132 2.761076 -.6342435 1.24919 -.5201869 0479711 1.179714 7606188 7259078 -0.10 0.920 -.4693997 4240755 0.71 0.480 -1.412967 2.98933 0.69 0.09 1.48 1.36 0.489 0.932 0.140 0.176 -.0905211 -.043945 -2.0845 -.8785386 1883905 0479026 14.63036 4.743552 -5.75 -5.55 0.000 0.000 -1.797824 -1.587695 -.877825 -.7529433 0.44 2.89 -1.47 -3.31 -4.07 -3.26 -1.59 -0.62 0.658 0.004 0.143 0.001 0.000 0.001 0.115 0.537 -.2480903 1445302 -.5873785 -.5153814 -.4459154 -.3513875 -.2097769 -.1267613 3917531 769344 0855407 -.129566 -.1544013 -.0861189 0231205 0663492 -1.81 0.072 -.5501912 0241409 -0.78 0.10 0.40 0.436 0.917 0.690 -.2474847 -.1990587 -.1501448 1072109 2212705 2263012 -1.30 -0.83 -1.17 -0.73 0.196 0.408 0.244 0.469 -4.625381 -3.614053 -3.314058 -5.17022 9579524 1.476427 8507175 2.395435 0.45 -0.33 -0.44 -0.34 -0.35 -0.47 -0.43 -0.53 -0.32 -0.48 -0.96 -0.79 -0.66 2.46 0.654 0.738 0.664 0.734 0.729 0.639 0.669 0.599 0.751 0.632 0.338 0.428 0.513 0.015 -1.639439 -3.220973 -3.329319 -3.182764 -3.234371 -3.379425 -3.352623 -3.544412 -3.231397 -3.425785 -4.215369 -3.942118 -3.712854 1.121775 2.601447 2.288413 2.126606 2.246358 2.26751 2.081023 2.157608 2.051837 2.334776 2.089136 1.457749 1.682438 1.862792 10.33858 Page | 92 Poisson Pseudo Maximum Likelihood model Equation (1C) Number of parameters: 32 Number of observations: 3456 Number of observations dropped: Pseudo log-likelihood: -2.985e+11 R-squared: 82180852 (Std Err adjusted for 169 clusters in id) ttrade Coef fta ldist lshare_gdp newdum97 newdum08 wto2 wtov wtop preer_vn preer_p _Iyd_3 _Iyd_4 _Iyd_5 _Iyd_6 _Iyd_7 _Iyd_8 _Iyd_9 _Iyd_10 _Iyd_11 _Iyd_12 _Iyd_13 _Iyd_14 _Iyd_15 _Iyd_16 _Iyd_17 _Iyd_18 _Iyd_19 _Iyd_20 _Iyd_21 _Iyd_22 _Iyd_23 _cons 5787054 -1.106899 8366843 -.3385959 -.1838565 3800253 -.2771902 3122929 -.3361718 -.3433833 -.6872334 -.6092339 -.4761149 -.7056274 -.5325488 -.1198002 -.0573505 -.1891408 -.26137 -.2767771 -.1952202 -.0911409 -.0771057 0621814 2932525 -.0949495 0 12.7984 Robust Std Err .3550655 1633482 0856252 1243541 0703086 2560631 302759 26281 2561087 4894867 4844415 4447378 4089292 1941686 2110791 0750354 0404477 (omitted) 1417397 1134652 0554607 0550451 0492311 0272812 (omitted) 1502627 1231726 (omitted) 0208976 (omitted) (omitted) 1.577521 z P>|z| [95% Conf Interval] 1.63 -6.78 9.77 -2.72 -2.61 1.48 -0.92 1.19 -1.31 -0.70 -1.42 -1.37 -1.16 -3.63 -2.52 -1.60 -1.42 0.103 0.000 0.000 0.006 0.009 0.138 0.360 0.235 0.189 0.483 0.156 0.171 0.244 0.000 0.012 0.110 0.156 -.1172101 -1.427056 668862 -.5823255 -.3216589 -.1218492 -.8705869 -.2028051 -.8381356 -1.30276 -1.636721 -1.480904 -1.277601 -1.086191 -.9462563 -.2668668 -.1366266 1.274621 -.7867423 1.004507 -.0948662 -.0460542 8818998 3162064 827391 165792 6159931 2622546 2624361 3253717 -.325064 -.1188413 0272665 0219256 -1.33 -2.30 -4.99 -3.55 -1.85 -2.83 0.182 0.021 0.000 0.000 0.064 0.005 -.4669455 -.4837577 -.385478 -.3031065 -.1876322 -.1305759 0886639 -.0389823 -.1680762 -.0873338 0053503 -.0236356 0.41 2.38 0.679 0.017 -.2323281 0518387 356691 5346663 -4.54 0.000 -.135908 -.0539909 8.11 0.000 9.706519 15.89029 Page | 93 Equation (2C) Number of parameters: 31 Number of observations: 2522 Number of observations dropped: Pseudo log-likelihood: -2.583e+11 R-squared: 82097161 (Std Err adjusted for 144 clusters in id) ttrade Coef fta ldist lshare_gdp newdum97 newdum08 wto2 wtov wtop preer_vn preer_p ervvn ervp _Iyd_6 _Iyd_7 _Iyd_8 _Iyd_9 _Iyd_10 _Iyd_11 _Iyd_12 _Iyd_13 _Iyd_14 _Iyd_15 _Iyd_16 _Iyd_17 _Iyd_18 _Iyd_19 _Iyd_20 _Iyd_21 _Iyd_22 _Iyd_23 _cons 6597402 -1.044353 831039 -.3803023 -.1312455 1072549 -.39916 2944957 7348285 -.3613273 10.19556 -2.358417 -.7510275 -.4644352 -.1222119 -.188792 -.2347504 -.3120616 -.3061053 -.1336324 -.0121969 -.1348365 4142974 185286 0 0 12.31091 Robust Std Err .4008363 1868936 0868348 1709281 095207 2564421 2571066 2524216 5902928 5304669 2.667404 7.068316 2160607 2286615 1201292 1345808 (omitted) 1668593 1386625 0623675 0565792 0604025 0420763 (omitted) 1567955 1725464 (omitted) (omitted) (omitted) (omitted) 1.604021 z P>|z| [95% Conf Interval] 1.65 -5.59 9.57 -2.22 -1.38 0.42 -1.55 1.17 1.24 -0.68 3.82 -0.33 -3.48 -2.03 -1.02 -1.40 0.100 0.000 0.000 0.026 0.168 0.676 0.121 0.243 0.213 0.496 0.000 0.739 0.001 0.042 0.309 0.161 -.1258846 -1.410658 6608459 -.7153152 -.3178479 -.3953623 -.9030797 -.2002415 -.422124 -1.401023 4.967544 -16.21206 -1.174499 -.9126035 -.3576607 -.4525656 1.445365 -.6780479 1.001232 -.0452894 0553568 6098722 1047597 789233 1.891781 6783687 15.42357 11.49523 -.3275564 -.0162669 113237 0749816 -1.41 -2.25 -4.91 -2.36 -0.20 -3.20 0.159 0.024 0.000 0.018 0.840 0.001 -.5617886 -.5838352 -.4283434 -.2445256 -.1305836 -.2173046 0922878 -.0402881 -.1838673 -.0227391 1061898 -.0523684 2.64 1.07 0.008 0.283 1069838 -.1528987 7216109 5234706 7.68 0.000 9.167088 15.45473 Page | 94