Series: Working Papers. 2017.
Author: Fernando López-Vicente, Jacopo Timini and Nicola Cortinovis.
Published in: The World Economy, Volume 45, Issue 9, September 2022, pp 2820-2853
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Abstract
Do trade agreements with labor provisions affect trade differently from those without
such provisions? Are their effects heterogeneous with respect to the level of development
of the countries involved and the labor intensity of goods traded? In this paper we
implement a state-of-the-art structural gravity model with intra-national trade and allow
for heterogeneous effects depending on the level of enforceability of labor provisions
(weak vs. strong provisions), sector (labor vs. non-labor intensive goods), members’
development level (North vs. South), and combinations of the three dimensions. We show
that, overall, the trade effects of trade agreements with labor provisions are larger than
those without. However, we also fi nd that while exports from the South to the North
display a signifi cant increase after a signature of a trade agreements with no or weak labor
provisions, this is not the case if strong labor provisions are included in the agreement,
and that such difference tend to be larger for labor-intensive goods.