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  5. Staggered Difference-in-Differences in Gravity Settings: Revisiting the Effects of Trade Agreements

American Economic Journal:
Applied Economics

ISSN 1945-7782 (Print) | ISSN 1945-7790 (Online)

Staggered Difference-in-Differences in Gravity Settings: Revisiting the Effects of Trade Agreements

  • Arne J. Nagengast
  • Yoto V. Yotov
American Economic Journal: Applied Economics (Forthcoming)

Abstract

We nest an extended two-way fixed effect (ETWFE) estimator for staggered differencein- differences within the structural gravity model. To test the ETWFE, we estimate the effects of regional trade agreements (RTAs). The results suggest that RTA estimates in the current gravity literature may be biased downward (by more than 50% in our sample). Sensitivity analyses confirm the robustness of our main findings and demonstrate the applicability of our methods in different settings. We expect the ETWFE methods to have significant implications for the estimates of other policy variables in the trade literature and for gravity regressions on migration and FDI flows.

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