We embed a model of the labor market with sector-specific search-and-matching frictions into a Ricardian model with a continuum of goods to show that trade reduces unemployment in countries with comparative advantage in sectors with more efficient labor markets and leads to higher unemployment in countries with comparative advantage in sectors with less efficient labor markets. We test this prediction in a panel dataset of 107 countries during the period 1995-2009 and find that the data supports the theoretical prediction. Our results also help reconciliate the apparently contradicting evidence in the empirical literature on the impact of trade on unemployment.

Building on earlier work by Estevadeordal, we construct a synthetic index (R-index) intending to capture the restrictiveness of rules of origin (PSRO) in preferential trading agreements. The R-index is applied to NAFTA and the Single List of the EU's PANEURO system covering all of the EU's preferential trade agreements. The R-index highlights how a common set of rules of origin can affect countries, differently depending on their export structures, and how their complexity varies across sectors. Having controlled for the extent of tariff preference at the tariff-line level, the R-index contributes to explain differences in the rate at which preferences are used. Finally, we compute estimates of the compliance costs associated with rules of origin under NAFTA and the Single List and find them to be between 6.8% of good value (NAFTA) and 8% (PANEURO).

We explore the impact on bilateral trade flows of the inclusion of a labor clause (LC) in Trade Agreements (TAs). Using a gravity type framework, we find that the introduction of LCs has on average no impact on bilateral trade flows. However, there is some interesting heterogeneity. Exports of low-income countries benefit from the introduction of LCs in North-South trade agreements. Interestingly, the impact is stronger when accompanied by deep cooperation. On the other hand, stronger enforcement mechanisms, at best, marginally reinforce the impact of LCs. The results are clearly inconsistent with the idea that LC are set for protectionist reasons, casting doubt on the reluctance by low-income countries to include labor clauses in their trade agreements.

The aim of this paper is (i) to assess the impact of regional agreements on members' trade in Sub-Saharan Africa (intra-regional trade as well as trade with the rest of the world), controlling for the other traditional determinants, including geography and transport costs and (ii) to compare the respective effect of the preferential trade agreements and the currency unions. Considering the period 1962-1996, we first assess the average impact of each regional agreement on their implementation period and second we show how these impacts have evolved. An "augmented" gravity model is designed, relying on a transport cost function, in which specific dummies allow trade creation and trade diversion effects to be separated. The model is estimated in panel with bilateral specific effects, to isolate the non-observable characteristics of each pair of countries, and according to the Hausman-Taylor (1981) method, which takes into account a possible endogeneity of some explanatory variables. During their implementation, the African regional trade agreements have generated a significant increase in trade between members, although initially often through trade diversion. In the two agreements of the CFA franc zone, the currency unions have largely reinforced the positive effect of the corresponding preferential trade agreements on intra-regional trade, while dampening their trade diversion effect. Actually, currency unions rather had a trade creation effect (all the more important as the international monetary environment has been more unstable), whereas preferential trade agreements resulted in important trade diversion.

The effective market access granted to textiles and apparel under the North American Free Trade Agreement (nafta) is estimated, taking into account the presence of rules of origin. First, estimates are provided of the effect of tariff preferences combined with rules of origin on the border prices of Mexican final goods exported to the United States and of U.S. intermediate goods exported to Mexico, based on eight-digit Harmonized System tariff-line data. A third of the estimated rise in the border price of Mexican apparel products is found to compensate for the cost of complying with nafta`s rules of origin, and nafta is found to have raised the price of U.S. intermediate goods exported to Mexico by around 12 percent, with downstream rules of origin accounting for a third of that increase. Second, simulations are used to estimate welfare gains for Mexican exporters from preferential market access under nafta. The presence of rules of origin is found to approximately halve these gains.

Gravity as both fact and theory is one of the great success stories of the modern study of international trade, and has featured prominently in policy debates such as that over Brexit. We first review the facts, noting the overwhelming evidence that trade tends to fall with distance. We then introduce some expository tools for understanding CES theories of gravity as a simple general-equilibrium system. Next, we point out some anomalies with the theory, including implausible predictions for bilateral trade balances. Finally, we sketch an approach based on subconvex gravity as a promising direction to resolving them.