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MERCOSUR in gravity: an accounting approach to analyzing its trade effects

Frederik Stender ()
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Frederik Stender: Ruhr-University Bochum

International Economics and Economic Policy, 2018, vol. 15, issue 2, 501-522

Abstract: Abstract 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 of trade; Regional economic integration; Trade creation and trade diversion; Tariff margin; Panel data (search for similar items in EconPapers)
JEL-codes: F13 F14 F15 (search for similar items in EconPapers)
Date: 2018
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