International Cartels and Bilateral Trade : An Empirical Investigation

This study evaluates the effect of international cartels on the volume of bilateral trade by relying on the gravity model of trade and the Poisson Pseudo Maximum Likelihood (PPML) estimator. Using a rich cartel data set that contains information on 170 discovered and prosecuted international cartels as well as the most disaggregated bilateral trade data for all OECD countries for the period from 1988 until 2012, I estimate the effect of each cartel on trade individually and find that the impact of cartels on international trade flows is quite heterogeneous across and within sectors. About 50% of the cartels in my sample exert a statistically significant effect on international trade with approximately half of these effects being positive. In a preliminary second-stage analysis, I also examine the potential determinants of these deferring cartel effects