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

Discussion Papers


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

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