Regional Integration in Latin America

Maria E. de Boyrie and Mordechai Kreinin
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Maria E. de Boyrie: Department of Finance, MSC 3FIN, College of Business, P.O. BOX 30001, New Mexico State University, Las Cruces, NM 88003, USA

Global Economy Journal (GEJ), 2016, vol. 16, issue 2, 293-311

Abstract: This paper assesses the welfare effects of integration in Latin America. It estimates trade creation and diversion of: 1) integration of the four Mercosur countries (Brazil, Argentina, Paraguay and Uruguay) and 2) amalgamation of Mercosur with the Andean group (Bolivia, Colombia, Ecuador and Peru). The method used to proxy trade creation is the change in total imports of a country from before to after integration, while trade diversion is proxied by the change in the country’s external imports between the two periods. A “control country” approach is used to hold constant the effects on imports of factors other than integration, such as income and price changes. With some exceptions Latin American integration was found beneficial to welfare in that trade creation exceeded trade diversion.

Keywords: trade creation; trade diversion; control country approach; Mercosur; regional integration; Latin America (search for similar items in EconPapers)
Date: 2016
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DOI: 10.1515/GEJ-2015-0066

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