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

Won Chang | Zendy; L. Alan Winters | Zendy

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

Author(s) -

Won Chang,

L. Alan Winters

Publication year - 2002

Publication title -

american economic review

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 16.936

H-Index - 297

eISSN - 1944-7981

pISSN - 0002-8282

DOI - 10.1257/00028280260344515

Subject(s) - economics , international economics , welfare , unit (ring theory) , market economy , mathematics , mathematics education

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. (JEL F13, F15).

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