Regional convergence, trade liberalization and agglomeration of activities: an analysis of NAFTA and MERCOSUR cases

Nicole Madariaga (), Sylvie Montout () and Patrice Ollivaud
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Nicole Madariaga: TEAM
Sylvie Montout: TEAM

Cahiers de la Maison des Sciences Economiques from Université Panthéon-Sorbonne (Paris 1)

Abstract: This study examines the theoretical and empirical link between trade integration, the density of activities and per capita income convergence within NAFTA members during the 1980-2000 period and within MERCOSUR partners from 1985 to 2000. We first build a two countries framework based on economic geography theory to explore this link. We introduce differences in wage levels between a rich and a poor region. We find that trade liberalization may have a positive impact on per capita income convergence if countries have initially similar wages and transaction costs are low. Second, the empirical approach refers to two different convergence concepts: homogenization and catch-up. We also determine activities' concentration trends within each trade agreement according to different measures of agglomeration. Afterwards, we use these measures to introduce an agglomeration variable in conditional convergence regressions. The analysis of the sigma and absolute beta-convergence concludes to a divergence between the two NAFTA partners. On the contrary, we observe a process of convergence in the MERCOSUR between 1985 and 2000 even if this process appears to slow down after 1991. Our conditional estimates also show that agglomeration plays a significant and positive role in growth after the implementation of treaties

Keywords: Growth; regional convergence; economic geography; trade integration (search for similar items in EconPapers)
JEL-codes: F43 O40 R11 R12 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2004-04
New Economics Papers: this item is included in nep-dev and nep-geo
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:mse:wpsorb:bla04069

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