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Trade Diverion and Declinning Tariffs: Evidence from MERCOSUR

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  • Pabo Sanguinetti
  • Alok Bohara
  • Kishore Guatanabe

Abstract

This paper empirically examines the alternative posed by Richardson (1993) to the traditional view that trade integration may exacerbate inefficiencies. Richardson’s hypothesis boldly predicts that trade diversion (and trade creation) may actually cause tariffs to decline! The hypothesis is fundamentally attributable to the presence of a political component in the governments’ objective functions. A cross-sectionally rich data set on trade and tariffs from the Mercosur-pact countries, primarily Argentina, is used. The evidence yields surprising conclusions about the validity of endogenous tariff determination in models of trade integration.

Suggested Citation

  • Pabo Sanguinetti & Alok Bohara & Kishore Guatanabe, 2003. "Trade Diverion and Declinning Tariffs: Evidence from MERCOSUR," Department of Economics Working Papers 003, Universidad Torcuato Di Tella.
    • Handle: RePEc:udt:wpecon:003
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    References listed on IDEAS

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