Conference Paper
Making Trade Policy Innovation Friendly: What Role of Trade Agreements?
No.
ERF_31_IE13
Publisher
ERF
Date
March, 2025
Topic
F. International Economics
The rapid increase in regional trade agreements (RTAs) in previous decades extends their effect beyond trade creation. This paper explores the dynamic effects of RTAs on fostering innovation through knowledge spillovers. By merging the World Bank’s Deep Trade Agreements dataset with the World Development Indicators, we make two key contributions. First, we differentiate the influence of various types of trade provisions, namely WTO-plus (enhancing commitments under WTO rules) and WTO-extra (extending beyond WTO rules), on domestic innovation. Second, we analyze how the breadth and depth of these provisions affect innovation outcomes differently. Our findings show that WTO-plus provisions play a more significant role in promoting innovation than WTO-extra provisions, with the depth of these commitments being particularly relevant. Moreover, the impact of RTAs is most pronounced in lower-middle and low-income countries, showing the importance of trade agreements in bridging the technological gap across countries. A strong heterogeneity is observed across different types of provisions. Yet, our results remain robust when we use alternative measures of innovation.
Authors
Yasmine Eissa
Assistant Professor, Onsi Sawiris School of Business,...
Research Fellows
Chahir Zaki
Chaired Professor of Economics, University of Orléans