Explaining MERCOSUR sectoral exports to the EU: The role of economic and geographical distance

Inmaculada Martínez-Zarzoso and Felicitas Nowak-Lehmann D.
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Felicitas Nowak-Lehmann D.: Ibero-America Institute for Economic Research of the University of Goettingen
Authors registered in the RePEc Author Service: Felicitas Nowak-Lehmann D.

International Trade from EconWPA

Abstract: We used a variant of the gravity equation to classify products according to their sensitivity to geographical and economic distance. We argue that products which are highly sensitive to economic distance (proxied with absolute differences in per capita income) and barely sensitive to geographical distance are the best candidates for future trade between the European Union and Mercosur. We estimated our empirical model by applying panel data methodology to allow for trading pair specific effects. In the estimation we made use of two additional explanatory variables which are found to be relevant when explaining trade, namely, infrastructure and exchange rates. Our results support the view that different products have a different sensitivity to distance and highlight the importance of using disaggregated data when analysing international trade flows.

Keywords: gravity model; panel data; sectoral trade flows; distance (search for similar items in EconPapers)
JEL-codes: F14 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eec, nep-geo, nep-ifn and nep-lam
Date: 2003-09-29
Note: Type of Document - Acrobat PDF; pages: 25 ; figures: none
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpit:0309025

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