Sharif Digital Repository

This article aims to provide new insights into trade effects of the Greater Arab Free Trade Area (GAFTA), using an imperfect competition framework. The model combines the new gravity model approach with supply-demand export equations in imperfect competition. In this regard, the role of scale economies, product varieties and expectations is explored. Facing the lack of international data on scale economies, we also develop a translog production system which makes it possible to obtain reliable estimates of this factor. For a more rigorous treatment of the endogeneity problem in the model, we make use of an instrumental GMM panel estimator. Results show limited effects of GAFTA on regional...