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
American Economic Journal: Applied Economics
vol. 17,
no. 1, January 2025
(pp. 271–96)
Abstract
We nest an extended two-way fixed effect (ETWFE) estimator for staggered difference-in-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 percent in our sample). Sensitivity analyses confirm the robustness of our main findings and demonstrate the applicability of our methods across settings. We expect the ETWFE methods to have significant implications for estimates of other policy variables in the trade literature and for gravity regressions on migration and foreign direct investment.Citation
Nagengast, Arne J., and Yoto V. Yotov. 2025. "Staggered Difference-in-Differences in Gravity Settings: Revisiting the Effects of Trade Agreements." American Economic Journal: Applied Economics, 17 (1): 271–96. DOI: 10.1257/app.20230089Additional Materials
JEL Classification
- C23 Single Equation Models; Single Variables: Panel Data Models; Spatio-temporal Models
- F14 Empirical Studies of Trade
- F15 Economic Integration
- F16 Trade and Labor Market Interactions
- J82 Labor Standards: Labor Force Composition
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