Working Paper: CEPR ID: DP1848
Authors: Marcelo Olarreaga; Isidro Soloaga
Abstract: This paper confronts the results of the endogenous tariff literature with MERCOSUR (Mercado Comun del Sur, literally, ?the Common Market of the Southern Cone?) evidence. It is shown that MERCOSUR?s common external tariff (CET), and member countries? deviations from the CET and from internal free trade can be explained by sector/industry lobbying as predicted by the endogenous tariff literature. If political economy viability is a key to success, then MERCOSUR is here to stay.
Keywords: Mercosur; Customs Unions; Political Economy
JEL Codes: F11; F13; F15
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Sectoral lobbying (L59) | CET (Y60) |
| Political economy variables (P29) | deviations from CET (C20) |
| Political economy variables (P29) | internal free trade deviations (F14) |
| Production levels (E23) | tariff preferences (F13) |
| Brazil's production share (L71) | CET structure (C10) |
| Sectors likely to create trade (F19) | exemptions from internal free trade (F10) |