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American Economic Review: Vol. 92 No. 4 (September 2002)

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

Article Citation

Chang, Won, and L. Alan Winters. 2002. "How Regional Blocs Affect Excluded Countries: The Price Effects of MERCOSUR ." American Economic Review, 92(4): 889-904.

DOI: 10.1257/00028280260344515

Abstract

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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Chang, Won
Winters, L. Alan


American Economic Review


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