Explaining MERCOSUR sectoral exports to the EU: The role of economic and geographical distance
AbstractWe 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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Bibliographic InfoPaper provided by EconWPA in its series International Trade with number 0309025.
Length: 25 pages
Date of creation: 29 Sep 2003
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gravity model; panel data; sectoral trade flows; distance;
Find related papers by JEL classification:
- F14 - International Economics - - Trade - - - Empirical Studies of Trade
This paper has been announced in the following NEP Reports:
- NEP-EEC-2003-10-05 (European Economics)
- NEP-GEO-2003-10-05 (Economic Geography)
- NEP-IFN-2003-10-05 (International Finance)
- NEP-LAM-2003-10-05 (Central & South America)
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