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

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Author Info
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)

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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.

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Publisher Info
Paper provided by EconWPA in its series International Trade with number 0309025.

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Length: 25 pages
Date of creation: 29 Sep 2003
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Handle: RePEc:wpa:wuwpit:0309025

Note: Type of Document - Acrobat PDF; pages: 25 ; figures: none
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Web page: http://129.3.20.41

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Related research
Keywords: gravity model; panel data; sectoral trade flows; distance;

Find related papers by JEL classification:
F14 - International Economics - - Trade - - - Country and Industry Studies of Trade

This paper has been announced in the following NEP Reports:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. James E. Anderson & Eric van Wincoop, 2001. "Gravity with Gravitas: A Solution to the Border Puzzle," NBER Working Papers 8079, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  2. 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. [Downloadable!] (restricted)
  3. Bergstrand, Jeffrey H, 1985. "The Gravity Equation in International Trade: Some Microeconomic Foundations and Empirical Evidence," The Review of Economics and Statistics, MIT Press, vol. 67(3), pages 474-81, August. [Downloadable!] (restricted)
  4. Egger, Peter, 2000. "A note on the proper econometric specification of the gravity equation," Economics Letters, Elsevier, vol. 66(1), pages 25-31, January. [Downloadable!] (restricted)
    Other versions:
  5. Deardorff, A.V., 1995. "Determinants of Bilateral Trade : Does Gravity Work in a Neoclassical World?," Papers 95-05, Michigan - Center for Research on Economic & Social Theory.
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  6. Anderson, James E, 1979. "A Theoretical Foundation for the Gravity Equation," American Economic Review, American Economic Association, vol. 69(1), pages 106-16, March. [Downloadable!] (restricted)
  7. Limao, Nuno & Venables, Anthony J., 1999. "Infrastructure, geographical disadvantage, and transport costs," Policy Research Working Paper Series 2257, The World Bank. [Downloadable!]
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Rojas, Gina E. Acosta & Calfat, Germán & Flôres Junior, Renato Galvão, 2005. "Trade and Infrastructure: evidences from the Andean Community," Economics Working Papers (Ensaios Economicos da EPGE) 580, Graduate School of Economics, Getulio Vargas Foundation (Brazil). [Downloadable!]
  2. 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. [Downloadable!]
    Other versions:
  3. 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, EconWPA. [Downloadable!]
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