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The Impact of MERCOSUR on Trade of Brazilian States

Author

Listed:
  • Jean-Marc Siroën

    (UMR DIAL LEDa Université Paris-Dauphine IRD)

  • Aycil Yucer

    (LEDa, UMR DIAL-Université Paris-Dauphine)

Abstract

We consider the impact of MERCOSUR on trade among Brazilian states and on trade by Brazilian states with MERCOSUR and the rest of the world. We use a theoretically founded gravity model to shed light on MERCOSUR’s possible creation and diversion effects as well as its “preference erosion” effect on trade among Brazilian states. Using data on interstate trade over a four-year period, including one year prior to the MERCOSUR period (1991), we deliver empirical evidence at state level with a focus on the impact of MERCOSUR which can vary across Brazilian regions. We show that MERCOSUR increased Brazilian states’ trade with member countries, but had no effect on either interstate trade or Brazilian states’ trade with third countries. The paper finds that MERCOSUR’s impact varies across Brazilian regions and that the Northern region is relatively less well integrated into international trade. We use an estimation method dealing better with the traditional issue of zero trade values and heteroskedasticity than OLS does. _________________________________ Le document décompose l'impact du MERCOSUR sur le commerce brésilien en distinguant les effets de l’accord sur les échanges entre les États brésiliens et de chaque État brésilien avec le MERCOSUR et le reste du monde. Nous utilisons un modèle de gravité théoriquement fondé pour mettre en évidence non seulement les éventuels effets de création et de détournement de commerce mais également un effet d’"érosion des préférences" quand on considère le Brésil comme un bloc commercial qui regrouperait les États. En utilisant les données sur le commerce interétatique sur une période de quatre ans, dont un an avant la période du MERCOSUR (1991), nous aboutissons à des résultats empiriques au niveau des 27 États brésiliens sur les impacts du MERCOSUR sur le commerce qui peuvent varier selon les régions du Brésil. Nous montrons que le MERCOSUR a permis d’augmenter le commerce des États avec les pays membres, sans effets importants sur le commerce interétatique ou avec les pays tiers. Nous confirmons que l'impact du MERCOSUR varie selon les régions du Brésil et que la région du Nord est relativement moins bien intégrée dans le commerce international. Nous utilisons une méthode d'estimation qui résout certains des problèmes des modèles de gravité comme les valeurs de commerce nulles et l’hétéroscédasticité trouvée en MCO.

Suggested Citation

  • Jean-Marc Siroën & Aycil Yucer, 2011. "The Impact of MERCOSUR on Trade of Brazilian States," Working Papers DT/2011/07, DIAL (Développement, Institutions et Mondialisation).
    • Handle: RePEc:dia:wpaper:dt201107
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    More about this item

    Keywords

    Regional Trade Agreements; MERCOSUR; Gravity Model; Trade Diversion; Trade Creation; Preference Erosion.;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration
    • R10 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General
    • R50 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - General

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