“Does Institutional Design Matter? A Study of Trade Effectiveness and PTA Flexibility/Rigidity"
David Bearce, Cody Eldredge and Brandy Jolliff. (forthcoming). “Does Institutional Design Matter? A Study of Trade Effectiveness and PTA Flexibility/Rigidity," International Studies Quarterly. This paper examines the trade effect of flexibility design features within preferential trading arrangements (PTAs). Using a gravity model of bilateral trade that incorporates multilateral trade resistance, it reports three main results. First, unconstrained escape provisions are bad for PTA trade effectiveness. Second, adding some restrictions to these escape provisions more than offsets the negative effect of unconstrained escape, leading to PTAs that are more trade effective than those without escape options. Third, adding more restrictions beyond a certain point only makes PTAs less trade effective. Thus, while too much institutional flexibility is bad for trade, so is too much institutional rigidity. However, when fitting these results to our descriptive data, it appears that most PTAs would be more trade effective if they had more restrictions on the use of their escape provisions. Thus, it appears that policymakers have generally under-selected for PTA escape restrictions.