The Impact of MERCOSUR on Trade of Brazilian States

Jean Siroen and Ayçıl Yücer

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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 4-year period, including 1 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 Center West region did not benefit from the integration to MERCOSUR. We use an estimation method dealing better with the traditional issue of zero trade values and heteroskedasticity than ordinary least squares does.

Keywords: Trade Diversion; Gravity Model; Trade Creation; Preference Erosion; Regional Trade Agreements; MERCOSUR; Création de commerce; Détournement de commerce; Erosion des préférences; Accords commerciaux régionaux; Modèles de gravité (search for similar items in EconPapers)
Date: 2012
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Published in Review of World Economics, 2012, 148 (3), ⟨10.1007/s10290-012-0127-0⟩

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Journal Article: The impact of MERCOSUR on trade of Brazilian states (2012)
Working Paper: The Impact of MERCOSUR on Trade of Brazilian States (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01485681

DOI: 10.1007/s10290-012-0127-0

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