Measuring Fixed Costs for Firms’Use of a Free Trade Agreement: Threshold Regression Approach

Discussion Papers


by HAYAKAWA Kazunobu

January 2011


In this paper, by employing the threshold regression method, we estimate the average tariff equivalent of fixed costs for the use of a free trade agreement (FTA) among all existing FTAs in the world. It is estimated to be 3.2%. This global estimate serves as a reference rate in the evaluation of each FTA’s fixed costs.

Keywords: FTA, gravity equation, threshold regression
JEL classification: F15, F53

PDF (292.9KB)

Please note that discussion papers are works in various stages of progress and most have not been edited and proofread and may contain errors of fact or judgment. Revised versions of these papers may subsequently appear in more formal publication series. The views expressed in this publication are those of the author(s). The IDE does not guarantee the accuracy of the data included and accepts no responsibility for any consequences arising from its use.