Export experience can also reduce the uncertainty about a new market Nicita et al. All of these can reduce the costs of breaking into third markets and therefore promote market diversification. To test the existence of such spillovers, we first look at the effect of exporting a product to the PTA area on the probability of subsequently exporting the same product to a market outside the preferential area.
We find that a previous experience in a member market does increase the probability of exporting to a third country. We then examine how this effect changes with the entry into force of the agreement. Our results suggest that there exists a positive externality associated with the PTA. In our estimations, a previous experience in the PTA area has an additional positive effect on the probability of exporting to a third country in the years that follow the agreement. Furthermore, our results show that the size of the effect varies across PTAs.
Although the precise channels of influence require further study, we find evidence that, by boosting exports of new products within the preferential area, PTAs can trigger certain expansion mechanisms and therefore act as stepping stones to other markets. Alvarez, R. Faruq and R. Lopez Amador, J. Opromolla Baldwin, R. Forslid, P. Martin, G. Ottaviano and F. Robert-Nicoud Bernard, A. Jensen, S. Redding and P. The tone is positive and motivational. Bulk orders 10 copies or more at a single time as well as re-sell opportunities are available.
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