MERCOSUR in Gravity: An Accounting Approach to Analyzing Its Trade Effects
Posted: 23 Jul 2015 Last revised: 27 Nov 2017
Date Written: November 22, 2017
This paper aims at unveiling the roots of integration-induced trade effects for MERCOSUR. For this purpose, its methodology combines previous dummy-variables- and continuous variable approaches to identifying trade creation and trade diversion effects in a gravity model framework. Applying a straightforward accounting exercise to the integration-induced trade effects which are found for MERCOSUR en bloc, two results are central: Firstly, with sectoral exceptions, I generally identify pure trade creating effects on the import side but also find trade diversion with associate countries when refining extra-bloc country status. Secondly, while extra-bloc import growth seems to be driven predominantly by non-tariff determinants, trade creation in pooled commodity imports for the largest fraction stems from differences in the tariff treatment between trading partners.
Keywords: Gravity model, regional economic integration, trade creation and trade diversion, tariffs, panel data
JEL Classification: F13, F14, F15
Suggested Citation: Suggested Citation