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DOES THE CENTRAL AMERICAN COMMON MARKE1 BENEFIT ITS MEMBERS?
Author(s) -
MÉNDEZ JOSÉ A.,
ROUSSLANG DONALD J.
Publication year - 1989
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/j.1465-7295.1989.tb02016.x
Subject(s) - economics , welfare , single market , imperfect , customs union , imperfect competition , international economics , microeconomics , econometrics , european union , market economy , linguistics , philosophy
This paper estimates the welfare consequences for members of the Central American Common Market if they abolish their union by imposing tariffs against each other. An imperfect substitutes trade model is used and direct estimates are provided for the effects of the union. These are important advances over previous studies, which relied on perfect substitutes models and merely imputed the effects of the union by assuming that it left either market shares or income elasticities of demand constant in member countries. The union is shown to impose static welfare losses on the members, which contradicts the results of previous studies.