Private returns to R&D and the impact of multilateral agreements on productivity: empirical strategies and novel evidence

Abstract

This article examines the relationship between participation in strategic trade control regimes and export performance, focusing on the Wassenaar Arrangement as a prominent case of dual-use goods regulation. The analysis addresses a core tension in international economic policy: how states manage the trade-off between safeguarding national security and pursuing greater integration into global markets. Using a multi-stage empirical strategy, the study first explores the determinants of Wassenaar participation, incorporating domestic political institutions, exposure to security threats, and geopolitical alignment. Second, it estimates the association between regime membership and bilateral exports using an augmented gravity model with fixed effects. Third, it applies a dynamic event study design to trace export trajectories around the time of accession, accounting for staggered adoption and heterogeneous timing. To support this analysis, a novel panel dataset is constructed by merging bilateral trade flows, treaty participation records, and political and institutional indicators, along with the computation of gravity-based economic variables widely used in the literature. The study contributes a new perspective by bringing systematic economic analysis into a field largely dominated by security and political science, and by providing new empirical insights into the trade implications of Wassenaar membership. The findings suggest that participation in the Wassenaar Arrangement tends to be more frequent among countries with democratic institutions and closer foreign policy alignment. Export levels appear to increase gradually after accession, potentially reflecting improved institutional capacity and regulatory credibility. Overall, the results highlight the dual role of strategic trade control regimes—as instruments of international security and as frameworks that may facilitate trade integration in sensitive industries.