How Regional Blocs Affect Excluded Countries: The Price Effects of MERCOSUR

The welfare effects of PTAs are most directly linked to changes in trade prices, i.e., the terms of trade. This paper employs a simple strategic pricing game in segmented markets to measure the effects of MERCOSUR on the pricing of "nonmember" exports to Brazil: As Brazil exempts its MERCO...

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Bibliographic Details
Published inThe American economic review Vol. 92; no. 4; pp. 889 - 904
Main Authors Chang, Won, Winters, L. Alan
Format Journal Article
LanguageEnglish
Published Nashville American Economic Association 01.09.2002
Subjects
Coefficients
Commodities
Competition
Customs unions
Economic impact
Economic theory
Economics
Exporters
Exports
Favoritism
Foreign exchange rates
Imports
International trade
Market prices
MERCOSUR
Prices
Regional economics
Relative prices
Studies
Tariffs
Terms of trade
Trade
Trade policy
Trade relations
Brazil
Argentina
Paraguay
Uruguay
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Summary:The welfare effects of PTAs are most directly linked to changes in trade prices, i.e., the terms of trade. This paper employs a simple strategic pricing game in segmented markets to measure the effects of MERCOSUR on the pricing of "nonmember" exports to Brazil: As Brazil exempts its MERCOSUR partners from tariffs, the resulting competitive pressure leads other exporters to reduce their prices. Working with detailed data on unit values and tariffs we find that the creation of MERCOSUR was associated with significant declines in the prices of nonmembers' exports to the region.
Bibliography:ObjectType-Article-2
SourceType-Scholarly Journals-1
ObjectType-Feature-1
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ISSN:0002-8282
1944-7981
DOI:10.1257/00028280260344515