Trade Blocks and the Gravity Model: Evidence from Latin American Countries

Carlos Carrillo-Tudela () and Carmen A. Li

No 542, Economics Discussion Papers from University of Essex, Department of Economics

Abstract: We apply the gravity model to examine the effects of the Andean Community and Mercosur on both intra-regional and intra-industrial trade in the period 1980-1997. After accounting for size and distance effects, the Andean Community preferential trade agreements had a significant effect on both the differentiated and reference products, in particular capital intensive goods. In contrast, Mercosur preferential trade agreements only had a positive effect on the capital intensive subcategory of the reference products.

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