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Indirect Trade Effects on Third Countries: Evidence from Japan Following the EU-South Korea Free Trade Agreement

Eriksson Möllerstedt, Vincent LU and Lindberg, Otto (2026) NEKH02 20252
Department of Economics
Abstract
This paper examines whether the EU-South Korea Free Trade Agreement is associated with indirect effects on third-country exports, with a particular focus on Japan. The analysis uses annual bilateral EU-15 import data over the period 2005-2018 and compares post-2011 import patterns from South Korea and Japan to those from a common group of exporters not directly affected by the agreement. The empirical approach is based on a gravity framework estimated using a PPML estimator combined with a difference-in-differences design. The results indicate weaker post-2011 EU import performance for both Japan and South Korea relative to the control group across sectors. Event-study analyses reveal systematic differences in pre-treatment export dynamics... (More)
This paper examines whether the EU-South Korea Free Trade Agreement is associated with indirect effects on third-country exports, with a particular focus on Japan. The analysis uses annual bilateral EU-15 import data over the period 2005-2018 and compares post-2011 import patterns from South Korea and Japan to those from a common group of exporters not directly affected by the agreement. The empirical approach is based on a gravity framework estimated using a PPML estimator combined with a difference-in-differences design. The results indicate weaker post-2011 EU import performance for both Japan and South Korea relative to the control group across sectors. Event-study analyses reveal systematic differences in pre-treatment export dynamics between the focal exporters and the control group, undermining identifying assumptions. As a result, the estimated post-2011 coefficients are interpreted as descriptive relative deviations rather than causal effects attributable to the agreement. (Less)
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author
Eriksson Möllerstedt, Vincent LU and Lindberg, Otto
supervisor
organization
course
NEKH02 20252
year
type
M2 - Bachelor Degree
subject
keywords
EU-South Korea FTA, Gravity model, Difference-in-Difference, Indirect effects, Japan
language
English
id
9220927
date added to LUP
2026-02-04 08:21:51
date last changed
2026-02-04 08:21:51
@misc{9220927,
  abstract     = {{This paper examines whether the EU-South Korea Free Trade Agreement is associated with indirect effects on third-country exports, with a particular focus on Japan. The analysis uses annual bilateral EU-15 import data over the period 2005-2018 and compares post-2011 import patterns from South Korea and Japan to those from a common group of exporters not directly affected by the agreement. The empirical approach is based on a gravity framework estimated using a PPML estimator combined with a difference-in-differences design. The results indicate weaker post-2011 EU import performance for both Japan and South Korea relative to the control group across sectors. Event-study analyses reveal systematic differences in pre-treatment export dynamics between the focal exporters and the control group, undermining identifying assumptions. As a result, the estimated post-2011 coefficients are interpreted as descriptive relative deviations rather than causal effects attributable to the agreement.}},
  author       = {{Eriksson Möllerstedt, Vincent and Lindberg, Otto}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{Indirect Trade Effects on Third Countries: Evidence from Japan Following the EU-South Korea Free Trade Agreement}},
  year         = {{2026}},
}