Working Paper: CEPR ID: DP5699
Authors: Marco Fugazza; Frédéric Robert-Nicoud
Abstract: This paper uses a combination of Ethier (1982) and Melitz's (2003) models to show that liberalizing trade among developing countries, so-called South-South trade, could contribute to improve the access to international markets of developing countries' would-be exporters. Lower trade barriers among developing countries has the effect of lowering the price of intermediate inputs and eventually allows exporters in those countries to serve international markets. We also compare unilateral and multilateral South-South trade liberalization and find that the latter unambiguously reduces the price of intermediates in all participating countries, whereas the former has ambiguous effects.
Keywords: Input-Output Linkages; Market Access; South-South Trade; Value Chain
JEL Codes: F12; F13; F15
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| South-South trade liberalization (F13) | lower prices of intermediate inputs (L11) |
| lower prices of intermediate inputs (L11) | increased ability to penetrate Northern markets (N91) |
| unilateral trade liberalization (F13) | ambiguous effects on prices (F69) |
| multilateral trade liberalization (F13) | lower prices for intermediates (D49) |
| lower prices for intermediates (D49) | enhanced access to North's markets (F15) |