Unequal trade, unequal gains: the heterogeneous impact of MERCOSUR

Abstract

We estimate the impact of MERCOSUR on trade flows and on gains from trade for its member countries using a standard modern general equilibrium quantitative structural gravity model. We find a highly heterogeneous impact on bilateral trade flows and gains from trade. We estimate that gains from trade attributable to MERCOSUR are equivalent to a 4.0% increase in per-capita consumption for Argentina. For the other countries, gains from trade are smaller: 0.8% for Uruguay, 0.5% for Paraguay, and 0.3% for Brazil. We study whether Brazil would benefit from withdrawing from MERCOSUR and signing a trade agreement with a different trade bloc but conclude that net gains from such a switch would be small, if any.

Rodolfo G. Campos

Economist

My research interests include macroeconomics, social insurance, and international economics.