IDEAS home Printed from https://ideas.repec.org/p/dia/wpaper/dt201107.html
   My bibliography  Save this paper

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
    as

    Download full text from publisher

    File URL: https://dial.ird.fr/wp-content/uploads/2021/10/2011-07-The-Impact-of-MERCOSUR-on-Trade-of-Brazilian-States.pdf
    File Function: First version, 2011
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Okubo, Toshihiro, 2004. "The border effect in the Japanese market: A Gravity Model analysis," Journal of the Japanese and International Economies, Elsevier, vol. 18(1), pages 1-11, March.
    2. repec:dau:papers:123456789/7448 is not listed on IDEAS
    3. James E. Anderson & Eric van Wincoop, 2003. "Gravity with Gravitas: A Solution to the Border Puzzle," American Economic Review, American Economic Association, vol. 93(1), pages 170-192, March.
    4. Martijn Burger & Frank van Oort & Gert-Jan Linders, 2009. "On the Specification of the Gravity Model of Trade: Zeros, Excess Zeros and Zero-inflated Estimation," Spatial Economic Analysis, Taylor & Francis Journals, vol. 4(2), pages 167-190.
    5. Head, Keith & Mayer, Thierry & Ries, John, 2010. "The erosion of colonial trade linkages after independence," Journal of International Economics, Elsevier, vol. 81(1), pages 1-14, May.
    6. Jeffrey A. Frankel, 1997. "Regional Trading Blocs in the World Economic System," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 72, January.
    7. Richard Baldwin & Daria Taglioni, 2006. "Gravity for Dummies and Dummies for Gravity Equations," NBER Working Papers 12516, National Bureau of Economic Research, Inc.
    8. Vuong, Quang H, 1989. "Likelihood Ratio Tests for Model Selection and Non-nested Hypotheses," Econometrica, Econometric Society, vol. 57(2), pages 307-333, March.
    9. Coulibaly, Souleymane, 2009. "Evaluating the Trade Effect of Developing Regional Trade Agreements: a Semi-parametric Approach," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 24, pages 709-743.
    10. Marie Daumal & Soledad Zignago, 2010. "Measure and determinants of border effects of Brazilian states," Papers in Regional Science, Wiley Blackwell, vol. 89(4), pages 735-758, November.
    11. Poncet, Sandra, 2003. "Measuring Chinese domestic and international integration," China Economic Review, Elsevier, vol. 14(1), pages 1-21.
    12. 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..
    13. Soloaga, Isidro & Alan Wintersb, L., 2001. "Regionalism in the nineties: what effect on trade?," The North American Journal of Economics and Finance, Elsevier, vol. 12(1), pages 1-29, March.
    14. Sandra Poncet, 2005. "A Fragmented China: Measure and Determinants of Chinese Domestic Market Disintegration," Review of International Economics, Wiley Blackwell, vol. 13(3), pages 409-430, August.
    15. Magee, Christopher S.P., 2008. "New measures of trade creation and trade diversion," Journal of International Economics, Elsevier, vol. 75(2), pages 349-362, July.
    16. J. M. C. Santos Silva & Silvana Tenreyro, 2006. "The Log of Gravity," The Review of Economics and Statistics, MIT Press, vol. 88(4), pages 641-658, November.
    17. Lourenço Senne Paz & Afonso Arinos de Mello Franco Neto, 2003. "Brazilian Border and Mercosul Integration Effects: an Exploratory Assessment Using the Gravity Model," Anais do XXXI Encontro Nacional de Economia [Proceedings of the 31st Brazilian Economics Meeting] c34, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].
    18. Freund, Caroline, 2009. "The trade response to global downturns : historical evidence," Policy Research Working Paper Series 5015, The World Bank.
    19. Haveman, J-D & Hummels, D, 1996. "Trade Creation and Trade Diversion : New Empirical Results," Papers 96-004, Purdue University, Krannert School of Management - Center for International Business Education and Research (CIBER).
    20. Holger C. Wolf, 2000. "Intranational Home Bias In Trade," The Review of Economics and Statistics, MIT Press, vol. 82(4), pages 555-563, November.
    21. Jeffrey A. Frankel, 1998. "The Regionalization of the World Economy," NBER Books, National Bureau of Economic Research, Inc, number fran98-1.
    22. Philippa Dee & Jyothi Gali, 2005. "The Trade and Investment Effects of Preferential Trading Arrangements," NBER Chapters, in: International Trade in East Asia, pages 133-176, National Bureau of Economic Research, Inc.
    23. Kei-Mu Yi, 2003. "Can Vertical Specialization Explain the Growth of World Trade?," Journal of Political Economy, University of Chicago Press, vol. 111(1), pages 52-102, February.
    24. Chen, Natalie, 2004. "Intra-national versus international trade in the European Union: why do national borders matter?," Journal of International Economics, Elsevier, vol. 63(1), pages 93-118, May.
    25. Rauch, James E., 1999. "Networks versus markets in international trade," Journal of International Economics, Elsevier, vol. 48(1), pages 7-35, June.
    26. SILVA, ORLANDO MONTEIRO DA & Almeida, Fernanda Maria de & OLIVEIRA, BETHANIA MOREIRA, 2007. "Comércio Internacional X Intranacional No Brasil: Medindo O Efeito-Fronteira," 45th Congress, July 22-25, 2007, Londrina, Paraná, Brazil 149609, Sociedade Brasileira de Economia, Administracao e Sociologia Rural (SOBER).
    27. Ghosh, Sucharita & Yamarik, Steven, 2004. "Are regional trading arrangements trade creating?: An application of extreme bounds analysis," Journal of International Economics, Elsevier, vol. 63(2), pages 369-395, July.
    28. McCallum, John, 1995. "National Borders Matter: Canada-U.S. Regional Trade Patterns," American Economic Review, American Economic Association, vol. 85(3), pages 615-623, June.
    29. William H. Greene, 1994. "Accounting for Excess Zeros and Sample Selection in Poisson and Negative Binomial Regression Models," Working Papers 94-10, New York University, Leonard N. Stern School of Business, Department of Economics.
    30. Hummels, David & Ishii, Jun & Yi, Kei-Mu, 2001. "The nature and growth of vertical specialization in world trade," Journal of International Economics, Elsevier, vol. 54(1), pages 75-96, June.
    31. Balistreri, Edward J. & Hillberry, Russell H., 2007. "Structural estimation and the border puzzle," Journal of International Economics, Elsevier, vol. 72(2), pages 451-463, July.
    32. Frankel, Jeffrey A. (ed.), 1997. "The Regionalization of the World Economy," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226259956.
    33. Sérgio Leusin Jr. & André Filipe Zago de Azevedo, 2008. "O Efeito Fronteira Das Regiões Brasileiras: Uma Aplicação Do Modelo Gravitacional," Anais do XXXVI Encontro Nacional de Economia [Proceedings of the 36th Brazilian Economics Meeting] 200807211358570, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Schweizer, Heidi & Yildirim, Yasin, 2022. "Investigating the Growth of Brazilian Agricultural Exports," Western Economics Forum, Western Agricultural Economics Association, vol. 20(2), December.
    2. Márquez-Ramos , Laura, 2016. "Regionalism, subnational variation and gravity: A four-country tale," INVESTIGACIONES REGIONALES - Journal of REGIONAL RESEARCH, Asociación Española de Ciencia Regional, issue 35, pages 7-36.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. repec:dau:papers:123456789/5844 is not listed on IDEAS
    2. repec:dau:papers:123456789/7077 is not listed on IDEAS
    3. Nuria Gallego & Carlos Llano, 2014. "The Border Effect and the Nonlinear Relationship between Trade and Distance," Review of International Economics, Wiley Blackwell, vol. 22(5), pages 1016-1048, November.
    4. Carlos Llano-Verduras & Santiago Pérez-Balsalobre & Ana Rincón-Aznar, 2021. "Market fragmentation and the rise of sub-national regulation," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 67(3), pages 765-797, December.
    5. Jin, Seung Ha, 2013. "The Effect of South Korean FTAs on Trade: Country-level and Industry-level Analyses," Master's Theses and Plan B Papers 149430, University of Minnesota, Department of Applied Economics.
    6. Pascal L. Ghazalian, 2012. "Home Bias in Primary Agricultural and Processed Food Trade: Assessing the Effects of National Degree of Uncertainty Aversion," Journal of Agricultural Economics, Wiley Blackwell, vol. 63(2), pages 265-290, June.
    7. Chen, Natalie & Novy, Dennis, 2008. "International Trade Integration: A Disaggregated Approach," CEPR Discussion Papers 7103, C.E.P.R. Discussion Papers.
    8. James E. Anderson & Eric van Wincoop, 2004. "Trade Costs," Journal of Economic Literature, American Economic Association, vol. 42(3), pages 691-751, September.
    9. Michele Fratianni & Francesco Marchionne, 2012. "Trade Costs and Economic Development," Economic Geography, Taylor & Francis Journals, vol. 88(2), pages 137-163, April.
    10. Florian Mölders & Ulrich Volz, 2011. "Trade creation and the status of FTAs: empirical evidence from East Asia," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 147(3), pages 429-456, September.
    11. Nicolas Sauter, 2012. "Talking trade: language barriers in intra-Canadian commerce," Empirical Economics, Springer, vol. 42(1), pages 301-323, February.
    12. Ying Ge & Yingxia Pu & Mengdi Sun, 2021. "Alternative measure of border effects across regions: Ripley's K‐function method," Papers in Regional Science, Wiley Blackwell, vol. 100(1), pages 287-302, February.
    13. Jens Wrona, 2018. "Border Effects Without Borders: What Divides Japan's Internal Trade?," CESifo Working Paper Series 7056, CESifo.
    14. Figueiredo, Erik & Lima, Luiz Renato & Loures, Alexandre & Oliveira, Celina, 2014. "Uma Análise para o Efeito-Fronteira no Brasil," Revista Brasileira de Economia - RBE, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil), vol. 68(4), October.
    15. Frederik Stender, 2018. "MERCOSUR in gravity: an accounting approach to analyzing its trade effects," International Economics and Economic Policy, Springer, vol. 15(2), pages 501-522, April.
    16. Wrona, Jens, 2015. "Border Effects without Borders," VfS Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 113060, Verein für Socialpolitik / German Economic Association.
    17. Magerman, Glenn & Studnicka, Zuzanna & Van Hove, Jan, 2016. "Distance and border effects in international trade: A comparison of estimation methods," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 10, pages 1-31.
    18. Hayakawa, Kazunobu, 2017. "Domestic and international border effects: The cases of China and Japan," China Economic Review, Elsevier, vol. 43(C), pages 118-126.
    19. repec:dau:papers:123456789/10626 is not listed on IDEAS
    20. Wrona, Jens, 2015. "Border effects without borders: What divides Japan's internal trade?," DICE Discussion Papers 185, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    21. Yoto V. Yotov, 2022. "On the role of domestic trade flows for estimating the gravity model of trade," Contemporary Economic Policy, Western Economic Association International, vol. 40(3), pages 526-540, July.
    22. Michele Fratianni & Francesco Marchionne, 2011. "The Limits to Integration," Chapters, in: Miroslav N. Jovanović (ed.), International Handbook on the Economics of Integration, Volume I, chapter 9, Edward Elgar Publishing.
    23. Agnosteva, Delina E. & Anderson, James E. & Yotov, Yoto V., 2019. "Intra-national trade costs: Assaying regional frictions," European Economic Review, Elsevier, vol. 112(C), pages 32-50.

    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

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:dia:wpaper:dt201107. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Loic Le Pezennec (email available below). General contact details of provider: https://edirc.repec.org/data/diallfr.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.