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Distributive Effects of Regional Trade Agreements on the "Small Trading Partners": Mercosur and the case of Uruguay and Paraguay

  • Borraz, Fernando
  • Rossi, Máximo
  • Ferrés, Daniel

Although trade integration has potential benefits for developing countries, it is disputed whether trade liberalization processes are, per se, sufficient for poverty reduction and inequality abatement. Abundant work has analyzed the link between tariff reduction, poverty levels and inequality in both developed and developing countries. Gains from trade are generally observed. Still, those benefits from integration are generally unevenly distributed.In our analysis we explore how gains from trade have been distributed in the two minor trade partners of MERCOSUR: Uruguay and Paraguay. We study the link between trade, poverty and inequality by analyzing the impact of trade liberalization through two main transmission channels: prices and income. Our papers show that in the case of Mercosur, the effect of trade on poverty (and income inequality) varies per country and per region. In particular, we conclude that trade integration policies cannot be regarded as a poverty-alleviating policy, per se.

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Paper provided by Verein für Socialpolitik, Research Committee Development Economics in its series Proceedings of the German Development Economics Conference, Berlin 2011 with number 14.

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Date of creation: 2011
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Handle: RePEc:zbw:gdec11:14
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  1. Sanguinetti, Pablo & Traistaru, Iulia & Volpe Martincus, Christian, 2004. "Economic integration and location of manufacturing activities: Evidence from MERCOSUR," ZEI Working Papers B 11-2004, ZEI - Center for European Integration Studies, University of Bonn.
  2. Guido G. Porto, 2003. "Using survey data to assess the distributional effects of trade policy," Policy Research Working Paper Series 3137, The World Bank.
  3. Porto, Guido G., 2003. "Trade reforms, market access, and poverty in Argentina," Policy Research Working Paper Series 3135, The World Bank.
  4. Antoni Estevadeordal & Junichi Goto & Raul Saez, 2000. "The New Regionalism in the Americas: The Case of MERCOSUR," IDB Publications (Working Papers) 9378, Inter-American Development Bank.
  5. Borraz Fernando & Lopez-Cordova Jose Ernesto, 2007. "Has Globalization Deepened Income Inequality in Mexico?," Global Economy Journal, De Gruyter, vol. 7(1), pages 1-57, February.
  6. Marisa Bucheli & Máximo Rossi, 1994. "Distribución del ingreso en el Uruguay (1984-1992)," Documentos de Trabajo (working papers) 1094, Department of Economics - dECON.
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