Luca De Benedictis, Università di Macerata

 

The Cobden-Chevalier effect: Evaluating the causal effect of the Most Favoured Nation clause in presence of Network interferences

 

Abstract

 

The purpose of this work is to evaluate the causal effect of the Network of the Cobden-Chevalier Treaties including the Most Favoured Nation (MFN) clause on trade flows of countries in the second half of the 19th century. This paper contributes to the literature on the topic in several ways. First, it applies up-to-date quantitative methods (i.e., nonparametric estimations technique) to study historical phenomena. These methods permit to estimate the MFN effect on trade flows rebalancing the control group without imposing any functional relationship between covariates and propensity score. Second, it describes Preferential Trade Agreements (PTAs) and their evolution through the lens of Network Analysis. Third, it addresses selection bias on unobservables by including fixed effects. Lastly, it controls for Network interferences due to trade agreements in order to account for trade interdependence. The outcomes of our preliminary estimates show that the Network of the Cobden-Chevalier Treaties with MFN clause had an impact on trade flows of countries in the second half of the 19th century. The effect of MFN on trade flows is positive when all observations are taking into account (27 per cent more than the average trade flows of 1865, on average). Last but not least, the empirical results show network structure of PTAs matters and should be taken into consideration in evaluation exercises.

 

 

 

Mauro Caselli, Università Parthenope