Globalization, Regional Trade Agreements, Service Trade

This study adopts the research framework of Bergstrand et al. (2015) and incorporates the heterogeneity of borders proposed by Anderson et al. (2018) to extend the structural gravity model with regional trade agreements (RTAs). By conducting empirical analysis using service trade data from 29 countries during the period of 2000 to 2014, the study aims to explore the effects of globalization and RTAs on service trade flows, as well as to uncover the “black box” of heterogeneity and same-region effects. The findings of the study are as follows: Firstly, the heterogeneity of same-region effects absorbs a significant portion of the effects of globalization and RTAs. When controlling for heterogeneity of same-region effects, the globalization effect vanishes, while the effect of RTAs remains at around 20%. Secondly, the role of bilateral natural connectivity variables exhibits fluctuations, and the impact of discriminatory trade costs does not show a significant decline. Lastly, the heterogeneity of same-region effects is significantly influenced by the quality of domestic institutions. This research contributes to the understanding of the relationship between regional trade agreements and globalization in service trade and provides policy implications for China's strategies in globalization.