Impact of Economic Integration on Trade: A Case Study of Pakistan

Abstract

Purpose: This paper tends to examine the impact of economic integration on trade for Pakistan. It studied all trade agreements of Pakistan with partner and non-partner nations. We test whether the trade creation (TC) and trade diversion (TD) effects on trade flows are same across for the members and non-member countries. Also, we have measured comparative advantage and comparative disadvantage. Design/Methodology/Approach: We have used correctly specified gravity model on the data of imports and exports of Pakistan starting from 1988 till 2020. We have also used Revealed Comparative Advantage (RCA) index in this research work. Findings: The results revealed from the RCA index shows that Pakistan recorded comparative advantage in most of the commodity group and less comparative disadvantage. Similarly, Pakistan is enhancing trade with partner and non-partner nations in majority of the commodity groups respectively. Implications/Originality/Value: We may conclude that Pakistan is having trade creation with its partner countries and non-partner countries in most of the agreements.

Keywords

• Gravity Model
• Panel Data
• Economic Integration
• Revealed Comparative Advantage
• Trade Creation and Trade Diversion