Trade Blocks and the Gravity Model

Trade Blocks and the Gravity Model: Evidence from Latin American Countries

We apply the gravity model to examine the effects of the Andean Community and Mercosur on both intra-regional and intra-industrial trade in the period 1980- 1997. After accounting for size distance and competitiveness effects, the Andean Community preferential trade agreements had a significant effect on the reference products but only a marginal effect on the differentiated products, in particular capital-intensive goods. Mercosur preferential trade agreements had a significant positive effect only on the capital-intensive subcategory of the reference products.

Ⅰ. Introduction

Ⅱ. Latin America Integration Association and Intra-regional Trade Flows

Ⅲ. The Gravity Model of Trade

Ⅳ. Estimating the Gravity Equation

Ⅴ. Conclusions and Policy Implications

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