IDEAS home Printed from https://ideas.repec.org/p/bde/wpaper/2114.html
   My bibliography  Save this paper

Unequal trade, unequal gains: the heterogeneous impact of MERCOSUR

Author

Listed:
  • Rodolfo G. Campos

    (Banco de España)

  • Jacopo Timini

    (Banco de España)

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.

Suggested Citation

  • Rodolfo G. Campos & Jacopo Timini, 2021. "Unequal trade, unequal gains: the heterogeneous impact of MERCOSUR," Working Papers 2114, Banco de España.
    • Handle: RePEc:bde:wpaper:2114
    as

    Download full text from publisher

    File URL: https://www.bde.es/f/webbde/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosTrabajo/21/Files/dt2114e.pdf
    File Function: First version, March 2021
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Simonovska, Ina & Waugh, Michael E., 2014. "The elasticity of trade: Estimates and evidence," Journal of International Economics, Elsevier, vol. 92(1), pages 34-50.
    2. Cosimo Beverelli & Alexander Keck & Mario Larch & Yoto V. Yotov, 2018. "Institutions, Trade and Development: A Quantitative Analysis," CESifo Working Paper Series 6920, CESifo.
    3. Besedes, Tibor & Kohl, Tristan & Lake, James, 2020. "Phase out tariffs, phase in trade?," Journal of International Economics, Elsevier, vol. 127(C).
    4. Jacopo Timini & Francesca Viani, 2022. "A highway across the Atlantic? Trade and welfare effects of the EU-Mercosur agreement," International Economics, CEPII research center, issue 169, pages 291-308.
    5. Gabriel Felbermayr & Mario Larch & Erdal Yalcin & Yoto V. Yotov, 2024. "On the heterogeneous trade and welfare effects of GATT/WTO membership," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 160(3), pages 983-1008, August.
    6. Scott L. Baier & Jeffrey H. Bergstrand & Erika Vidal, 2007. "Free Trade Agreements In the Americas: Are the Trade Effects Larger than Anticipated?," The World Economy, Wiley Blackwell, vol. 30(9), pages 1347-1377, September.
    7. Thierry Mayer & Vincent Vicard & Soledad Zignago & Beata Javorcik, 2019. "The cost of non-Europe, revisited," Economic Policy, CEPR;CES;MSH, vol. 34(98), pages 145-199.
    8. Yotov, Yoto V., 2012. "A simple solution to the distance puzzle in international trade," Economics Letters, Elsevier, vol. 117(3), pages 794-798.
    9. Céline Carrère & Anja Grujovic & Frédéric Robert-Nicoud, 2020. "Trade and Frictional Unemployment in the Global Economy," Journal of the European Economic Association, European Economic Association, vol. 18(6), pages 2869-2921.
    10. Scott L. Baier & Jeffrey H. Bergstrand & John P. Bruno, 2019. "Putting Canada in the penalty box: trade and welfare effects of eliminating NAFTA," CESifo Working Paper Series 7678, CESifo.
    11. Magee, Christopher S.P., 2008. "New measures of trade creation and trade diversion," Journal of International Economics, Elsevier, vol. 75(2), pages 349-362, July.
    12. Lake, James & Yildiz, Halis M., 2016. "On the different geographic characteristics of Free Trade Agreements and Customs Unions," Journal of International Economics, Elsevier, vol. 103(C), pages 213-233.
    13. repec:hal:spmain:info:hdl:2441/6o8sdn6fuv9m1r3rt5verlv4b7 is not listed on IDEAS
    14. Baier, Scott L. & Yotov, Yoto V. & Zylkin, Thomas, 2019. "On the widely differing effects of free trade agreements: Lessons from twenty years of trade integration," Journal of International Economics, Elsevier, vol. 116(C), pages 206-226.
    15. Fally, Thibault, 2015. "Structural gravity and fixed effects," Journal of International Economics, Elsevier, vol. 97(1), pages 76-85.
    16. Scott L. Baier & Jeffrey H. Bergstrand & John P. Bruno, 2019. "Putting Canada in the penalty box: Trade and welfare effects of eliminating North American Free Trade Agreement," The World Economy, Wiley Blackwell, vol. 42(12), pages 3488-3514, December.
    17. Heid, Benedikt & Larch, Mario, 2016. "Gravity with unemployment," Journal of International Economics, Elsevier, vol. 101(C), pages 70-85.
    18. Céline Carrère & Anja Grujovic & Frédéric Robert-Nicoud, 0. "Trade and Frictional Unemployment in the Global Economy," Journal of the European Economic Association, European Economic Association, vol. 18(6), pages 2869-2921.
    19. Costas Arkolakis & Arnaud Costinot & Andres Rodriguez-Clare, 2012. "New Trade Models, Same Old Gains?," American Economic Review, American Economic Association, vol. 102(1), pages 94-130, February.
    20. Campos, Rodolfo G. & Timini, Jacopo & Vidal, Elena, 2021. "Structural gravity and trade agreements: Does the measurement of domestic trade matter?," Economics Letters, Elsevier, vol. 208(C).
    21. Michael E. Waugh, 2010. "International Trade and Income Differences," American Economic Review, American Economic Association, vol. 100(5), pages 2093-2124, December.
    22. Robert C. Feenstra & John Romalis, 2014. "International Prices and Endogenous Quality," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 129(2), pages 477-527.
    23. Glick, Reuven & Rose, Andrew K., 2016. "Currency unions and trade: A post-EMU reassessment," European Economic Review, Elsevier, vol. 87(C), pages 78-91.
    24. Ayman El Dahrawy Sánchez‐Albornoz & Jacopo Timini, 2021. "Trade agreements and Latin American trade (creation and diversion) and welfare," The World Economy, Wiley Blackwell, vol. 44(7), pages 2004-2040, July.
    25. Thierry Mayer & Vincent Vicard & Soledad Zignago & Beata Javorcik, 2019. "The cost of non-Europe, revisited," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 34(98), pages 145-199.
    26. Marcel Vaillant & Manuel Flores & Pedro Esteban Moncarz, 2020. "Missing data in the structural gravity: estimation bias of preferential trade agreements due to the omission of internal trade," Working Papers 8, Red Nacional de Investigadores en Economía (RedNIE).
    27. Bajzik, Josef & Havranek, Tomas & Irsova, Zuzana & Schwarz, Jiri, 2020. "Estimating the Armington elasticity: The importance of study design and publication bias," Journal of International Economics, Elsevier, vol. 127(C).
    28. Bergstrand, Jeffrey H. & Larch, Mario & Yotov, Yoto V., 2015. "Economic integration agreements, border effects, and distance elasticities in the gravity equation," European Economic Review, Elsevier, vol. 78(C), pages 307-327.
    29. J. M. C. Santos Silva & Silvana Tenreyro, 2006. "The Log of Gravity," The Review of Economics and Statistics, MIT Press, vol. 88(4), pages 641-658, November.
    30. Tristan Kohl, 2014. "Do we really know that trade agreements increase trade?," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 150(3), pages 443-469, August.
    31. Robert E. Lucas Jr., 2003. "Macroeconomic Priorities," American Economic Review, American Economic Association, vol. 93(1), pages 1-14, March.
    32. Ingo Borchert & Mario Larch & Serge Shikher & Yoto V. Yotov, 2021. "The International Trade and Production Database for Estimation (ITPD-E)," International Economics, CEPII research center, issue 166, pages 140-166.
    33. Peter H. Egger & Mario Larch & Yoto V. Yotov, 2022. "Gravity Estimations with Interval Data: Revisiting the Impact of Free Trade Agreements," Economica, London School of Economics and Political Science, vol. 89(353), pages 44-61, January.
    34. Egger, Peter H. & Tarlea, Filip, 2015. "Multi-way clustering estimation of standard errors in gravity models," Economics Letters, Elsevier, vol. 134(C), pages 144-147.
    35. Baier, Scott L. & Bergstrand, Jeffrey H. & Clance, Matthew W., 2018. "Heterogeneous effects of economic integration agreements," Journal of Development Economics, Elsevier, vol. 135(C), pages 587-608.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Jacopo Timini & Francesca Viani, 2022. "A highway across the Atlantic? Trade and welfare effects of the EU-Mercosur agreement," International Economics, CEPII research center, issue 169, pages 291-308.
    2. Timini, Jacopo, 2023. "Revisiting the ‘Cobden-Chevalier network’ trade and welfare effects," Explorations in Economic History, Elsevier, vol. 89(C).
    3. Ayman El Dahrawy Sánchez‐Albornoz & Jacopo Timini, 2021. "Trade agreements and Latin American trade (creation and diversion) and welfare," The World Economy, Wiley Blackwell, vol. 44(7), pages 2004-2040, July.
    4. Campos, Rodolfo G. & Estefania-Flores, Julia & Furceri, Davide & Timini, Jacopo, 2023. "Geopolitical fragmentation and trade," Journal of Comparative Economics, Elsevier, vol. 51(4), pages 1289-1315.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Timini, Jacopo & Viani, Francesca, 2022. "A highway across the Atlantic? Trade and welfare effects of the EU-Mercosur agreement," International Economics, Elsevier, vol. 169(C), pages 291-308.
    2. Timini, Jacopo, 2023. "Revisiting the ‘Cobden-Chevalier network’ trade and welfare effects," Explorations in Economic History, Elsevier, vol. 89(C).
    3. Campos, Rodolfo G. & Estefania-Flores, Julia & Furceri, Davide & Timini, Jacopo, 2023. "Geopolitical fragmentation and trade," Journal of Comparative Economics, Elsevier, vol. 51(4), pages 1289-1315.
    4. Baier, Scott L. & Yotov, Yoto V. & Zylkin, Thomas, 2019. "On the widely differing effects of free trade agreements: Lessons from twenty years of trade integration," Journal of International Economics, Elsevier, vol. 116(C), pages 206-226.
    5. Ayman El Dahrawy Sánchez‐Albornoz & Jacopo Timini, 2021. "Trade agreements and Latin American trade (creation and diversion) and welfare," The World Economy, Wiley Blackwell, vol. 44(7), pages 2004-2040, July.
    6. Campos, Rodolfo G. & Timini, Jacopo & Vidal, Elena, 2021. "Structural gravity and trade agreements: Does the measurement of domestic trade matter?," Economics Letters, Elsevier, vol. 208(C).
    7. Benedikt Heid & Mario Larch & Yoto V. Yotov, 2021. "Estimating the effects of non‐discriminatory trade policies within structural gravity models," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 54(1), pages 376-409, February.
    8. Heid, Benedikt & Stähler, Frank, 2024. "Structural gravity and the gains from trade under imperfect competition: Quantifying the effects of the European Single Market," Economic Modelling, Elsevier, vol. 131(C).
    9. Silviano Esteve-Pérez & Salvador Gil-Pareja & Rafael Llorca-Vivero & Jordi Paniagua, 2021. "Has the Euro paid off? A study of the trade-induced welfare effects of the EMU," Working Papers 2103, Department of Applied Economics II, Universidad de Valencia.
    10. Jacopo Timini & Nicola Cortinovis & Fernando López Vicente, 2022. "The heterogeneous effects of trade agreements with labour provisions," The World Economy, Wiley Blackwell, vol. 45(9), pages 2820-2853, September.
    11. Yoto V. Yotov, 2022. "On the role of domestic trade flows for estimating the gravity model of trade," Contemporary Economic Policy, Western Economic Association International, vol. 40(3), pages 526-540, July.
    12. Felbermayr, Gabriel & Yotov, Yoto V., 2021. "From theory to policy with gravitas: A solution to the mystery of the excess trade balances," European Economic Review, Elsevier, vol. 139(C).
    13. Yoto V. Yotov, 2021. "The Variation of Gravity within Countries (or 15 Reasons Why Gravity Should Be Estimated with Domestic Trade Flows)," CESifo Working Paper Series 9057, CESifo.
    14. Mario Larch & Jeff Luckstead & Yoto V. Yotov, 2024. "Economic sanctions and agricultural trade," American Journal of Agricultural Economics, John Wiley & Sons, vol. 106(4), pages 1477-1517, August.
    15. Duc Bao Nguyen & Anne‐Gaël Vaubourg, 2021. "Financial intermediation, trade agreements and international trade," The World Economy, Wiley Blackwell, vol. 44(3), pages 788-817, March.
    16. Mario Larch & Aiko F. Schmeißer & Joschka Wanner, 2021. "A Tale of (almost) 1001 Coefficients: The Deep and Heterogeneous Effects of the EU‐Turkey Customs Union," Journal of Common Market Studies, Wiley Blackwell, vol. 59(2), pages 242-260, March.
    17. Ingo Borchert & Mario Larch & Serge Shikher & Yoto V. Yotov, 2022. "Disaggregated gravity: Benchmark estimates and stylized facts from a new database," Review of International Economics, Wiley Blackwell, vol. 30(1), pages 113-136, February.
    18. Dutt, Pushan, 2020. "The WTO is not passé," European Economic Review, Elsevier, vol. 128(C).
    19. Piermartini, Roberta & Yotov, Yoto, 2016. "Estimating Trade Policy Effects with Structural Gravity," School of Economics Working Paper Series 2016-10, LeBow College of Business, Drexel University.
    20. Mario Larch & Serge Shikher & Constantinos Syropoulos & Yoto V. Yotov, 2022. "Quantifying the impact of economic sanctions on international trade in the energy and mining sectors," Economic Inquiry, Western Economic Association International, vol. 60(3), pages 1038-1063, July.

    More about this item

    Keywords

    general equilibrium; international trade; MERCOSUR; structural gravity model; trade agreements;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration
    • F62 - International Economics - - Economic Impacts of Globalization - - - Macroeconomic Impacts

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bde:wpaper:2114. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Ángel Rodríguez. Electronic Dissemination of Information Unit. Research Department. Banco de España (email available below). General contact details of provider: https://edirc.repec.org/data/bdegves.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.