Do Free Trade Agreements Increase Economic Growth of the Member Countries?

SummaryThis paper assesses whether a bilateral FTA raises the growth rates of the two countries engaging in the FTA. A nonparametric matching approach, which imposes no specific functional forms and can be applied to a broad range of data structures, is employed to estimate the FTA effect on the growth. We find that FTAs exert insignificant effects on aggregated growth from one to 10 year period after launch, but detect a significant upward trend in the gap between the growth rates of per capita GDP within a bilateral FTA. This implies uneven FTA effects across countries within an FTA.