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A highway across the Atlantic? Trade and welfare effects of the EU-Mercosur agreement

Jacopo Timini and Francesca Viani ()

No 2023, Working Papers from Banco de España, Working Papers Homepage

Abstract: In this paper we analyze the EU-Mercosur agreement and predict its effects on trade and welfare using a general equilibrium structural gravity model. First, we estimate the increase in trade flows generated by trade agreements that are similar to the EU-Mercosur one, in a partial equilibrium setting. In a second step, the estimated increase in trade is mapped into reductions in bilateral trade costs and imputed to EU-Mercosur country pairs to compute the general equilibrium effects of the agreement in terms of trade creation, trade diversion, and welfare effects. Our results indicate that the EU-Mercosur agreement is likely to have a positive impact on trade and welfare of both regional blocs, although with substantial heterogeneity both between and within the two areas.

Keywords: EU; Mercosur; trade agreement; structural gravity; general equilibrium (search for similar items in EconPapers)
JEL-codes: F13 F14 F15 F17 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2020-07
New Economics Papers: this item is included in nep-int
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https://www.bde.es/f/webbde/SES/Secciones/Publicac ... 20/Files/dt2023e.pdf First version, July 2020 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:bde:wpaper:2023

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