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The Cost of Non-Integration: Evidence from Nigeria Opting Out of an Economic Partnership Agreement with the EU

Svensson, Kevin LU (2022) NEKP01 20221
Department of Economics
Abstract
Trade integration is thought to benefit developing countries, so what is the cost of staying out of trade agreements? This paper studies the case of Nigeria, which, like its neighbours in West Africa and other ACP countries, has the option of entering an Economic Partnership Agreement (EPA) with the European Union (EU), but has chosen not to. Hence, this study investigates the question: Would Nigeria have exported more to the EU if it had indeed entered an EPA? To answer this, I employ the Synthetic control method (SCM), using the exports of the other EPA-eligible countries that did indeed join an EPA to construct plausible synthetic export flows for Nigeria. The results show that actual Nigerian export flows to the EU underperform against... (More)
Trade integration is thought to benefit developing countries, so what is the cost of staying out of trade agreements? This paper studies the case of Nigeria, which, like its neighbours in West Africa and other ACP countries, has the option of entering an Economic Partnership Agreement (EPA) with the European Union (EU), but has chosen not to. Hence, this study investigates the question: Would Nigeria have exported more to the EU if it had indeed entered an EPA? To answer this, I employ the Synthetic control method (SCM), using the exports of the other EPA-eligible countries that did indeed join an EPA to construct plausible synthetic export flows for Nigeria. The results show that actual Nigerian export flows to the EU underperform against the synthetic export flows with approximately 37 percent. Remembering that the synthetic export flows represent the counterfactual world where Nigeria did enter an EPA, this suggests that the choice not to join an EPA has cost Nigeria substantial export opportunities. Furthermore, results also show that the trade effects of an EPA are gradual, not fully showing up until a few years after the agreement has been formally introduced. The results are robust to a large number of alternative estimation strategies, such as several specifications of the Difference-in-differences model and sensitivity tests. (Less)
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author
Svensson, Kevin LU
supervisor
organization
course
NEKP01 20221
year
type
H2 - Master's Degree (Two Years)
subject
keywords
ACP countries, Economic Partnership Agreement, European Union, Nigeria, Synthetic Control Method
language
English
id
9102169
date added to LUP
2022-11-03 09:24:03
date last changed
2023-10-23 15:01:08
@misc{9102169,
  abstract     = {{Trade integration is thought to benefit developing countries, so what is the cost of staying out of trade agreements? This paper studies the case of Nigeria, which, like its neighbours in West Africa and other ACP countries, has the option of entering an Economic Partnership Agreement (EPA) with the European Union (EU), but has chosen not to. Hence, this study investigates the question: Would Nigeria have exported more to the EU if it had indeed entered an EPA? To answer this, I employ the Synthetic control method (SCM), using the exports of the other EPA-eligible countries that did indeed join an EPA to construct plausible synthetic export flows for Nigeria. The results show that actual Nigerian export flows to the EU underperform against the synthetic export flows with approximately 37 percent. Remembering that the synthetic export flows represent the counterfactual world where Nigeria did enter an EPA, this suggests that the choice not to join an EPA has cost Nigeria substantial export opportunities. Furthermore, results also show that the trade effects of an EPA are gradual, not fully showing up until a few years after the agreement has been formally introduced. The results are robust to a large number of alternative estimation strategies, such as several specifications of the Difference-in-differences model and sensitivity tests.}},
  author       = {{Svensson, Kevin}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{The Cost of Non-Integration: Evidence from Nigeria Opting Out of an Economic Partnership Agreement with the EU}},
  year         = {{2022}},
}