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Explaining MERCOSUR sectoral exports to the EU: The role of economic and geographical distance

Author

Listed:
  • Inmaculada Martínez-Zarzoso

    (Ibero-America Institute for Economic Research of the University of Goettingen)

  • Felicitas Nowak-Lehmann D.

    (Ibero-America Institute for Economic Research of the University of Goettingen)

Abstract

We used a variant of the gravity equation to classify products according to their sensitivity to geographical and economic distance. We argue that products which are highly sensitive to economic distance (proxied with absolute differences in per capita income) and barely sensitive to geographical distance are the best candidates for future trade between the European Union and Mercosur. We estimated our empirical model by applying panel data methodology to allow for trading pair specific effects. In the estimation we made use of two additional explanatory variables which are found to be relevant when explaining trade, namely, infrastructure and exchange rates. Our results support the view that different products have a different sensitivity to distance and highlight the importance of using disaggregated data when analysing international trade flows.

Suggested Citation

  • Inmaculada Martínez-Zarzoso & Felicitas Nowak-Lehmann D., 2003. "Explaining MERCOSUR sectoral exports to the EU: The role of economic and geographical distance," International Trade 0309025, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpit:0309025
    Note: Type of Document - Acrobat PDF; pages: 25 ; figures: none
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    References listed on IDEAS

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    1. Diao, Xinshen & Somwaru, Agapi, 2000. "An Inquiry on General Equilibrium Effects of MERCOSUR--An Intertemporal World Model," Journal of Policy Modeling, Elsevier, vol. 22(5), pages 557-588, September.
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    5. Alan V. Deardorff, 2011. "Determinants of Bilateral Trade: Does Gravity Work in a Neoclassical World?," World Scientific Book Chapters, in: Robert M Stern (ed.), Comparative Advantage, Growth, And The Gains From Trade And Globalization A Festschrift in Honor of Alan V Deardorff, chapter 24, pages 267-293, World Scientific Publishing Co. Pte. Ltd..
    6. Ventura-Dias, Vivianne & Cabezas B., Mabel & Contador, Jaime, 1999. "Trade reforms and trade patterns in Latin America," Comercio Internacional 4391, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    7. Limao, Nuno & Venables, Anthony J., 1999. "Infrastructure, geographical disadvantage, and transport costs," Policy Research Working Paper Series 2257, The World Bank.
    8. Egger, Peter, 2000. "A note on the proper econometric specification of the gravity equation," Economics Letters, Elsevier, vol. 66(1), pages 25-31, January.
    9. Anderson, James E, 1979. "A Theoretical Foundation for the Gravity Equation," American Economic Review, American Economic Association, vol. 69(1), pages 106-116, March.
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    Citations

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    Cited by:

    1. Acosta Rojas, Gina E. & Calfat, Germán & Flôres Junior, Renato Galvão, 2005. "Trade and infrastructure: evidences from the Andean Community," FGV EPGE Economics Working Papers (Ensaios Economicos da EPGE) 580, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil).
    2. Martínez-Zarzoso, Inmaculada & Nowak-Lehmann D., Felicitas, 2004. "MERCOSUR-European Union Trade: How important is EU Trade Liberalisation for MERCOSUR's Exports?," University of Göttingen Working Papers in Economics 30, University of Goettingen, Department of Economics.
    3. Felicitas Nowak-Lehmann D. & Inmaculada Martínez Zarzoso, 2003. "Would MERCOSUR’s Exports to the EU Profit from Trade Liberalisation? Some General Insights and a Simulation Study for Argentina," Ibero America Institute for Econ. Research (IAI) Discussion Papers 092, Ibero-America Institute for Economic Research.
    4. Felicitas Nowak-Lehmann & Inmaculada Martínez-Zarzoso, 2003. "MERCOSUR-EU trade: The impact of adverse macroeconomic developments and trade barriers on MERCOSUR exports," International Trade 0310002, University Library of Munich, Germany.
    5. María Luisa Recalde & Luis Marcelo Florensa & Iván Iturralde, 2008. "Gravity Equation and Trade Agreements: A Different Econometric Approach," Revista de Economía y Estadística, Universidad Nacional de Córdoba, Facultad de Ciencias Económicas, Instituto de Economía y Finanzas, vol. 46(2), pages 83-104, Diciembre.

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    More about this item

    Keywords

    gravity model; panel data; sectoral trade flows; distance;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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