Unequal trade, unequal gains: the heterogeneous impact of MERCOSUR

Rodolfo Campos and Jacopo Timini

Applied Economics, 2022, vol. 54, issue 49, 5655-5669

Abstract: We estimate the impact of MERCOSUR on trade flows and on gains from trade for its member countries using a standard modern general equilibrium quantitative structural gravity model. We find a highly heterogeneous impact on bilateral trade flows and gains from trade. We estimate that gains from trade attributable to MERCOSUR are equivalent to a 4.0% increase in per-capita consumption for Argentina. For the other countries, gains from trade are smaller: 0.8% for Uruguay, 0.5% for Paraguay, and 0.3% for Brazil. We study whether Brazil would benefit from withdrawing from MERCOSUR and signing a trade agreement with a different trade bloc but conclude that net gains from such a switch would be small, if any.

Date: 2022
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DOI: 10.1080/00036846.2022.2047606

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