The Bright Side of the Generalized System of (Trade) Preferences: Lessons from Agricultural Trade
Empirical evidence on the Generalized System of Preferences (GSP) for low-income countries generally portrays a rather stark prediction: the program has produced virtually no impact on intended low-income beneficiaries’ exports to high-income countries. This result, based on total merchandise trade, is misleading because it masks three underlying heterogeneities in the program: i) preference structure across countries, ii) pre-existing distortions across sectors, and iii) rules of origin. Using a theoretically consistent gravity equation for sector- and product-level trade over 1962–2010, we illustrate that the GSP has delivered significant positive effects for lowincome countries’ agricultural exports (but not necessarily for their nonagricultural exports) to developed countries.
Sharma, Anupa; Boys, Kathryn; Grant, Jason, The Bright Side of the Generalized System of (Trade) Preferences: Lessons from Agricultural Trade, Journal of Agricultural and Resource Economics, Volume 44, Issue 1, January 2019, Pages 32-61
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