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Regional convergence, trade liberalization and agglomeration of activities: an analysis of NAFTA and MERCOSUR cases

Author

Listed:
  • Nicole Madariaga

    (TEAM)

  • Sylvie Montout

    (TEAM)

  • Patrice Ollivaud

    (OECD)

Abstract
This study examines the theoretical and empirical link between trade integration, the density of activities and per capita income convergence within NAFTA members during the 1980-2000 period and within MERCOSUR partners from 1985 to 2000. We first build a two countries framework based on economic geography theory to explore this link. We introduce differences in wage levels between a rich and a poor region. We find that trade liberalization may have a positive impact on per capita income convergence if countries have initially similar wages and transaction costs are low. Second, the empirical approach refers to two different convergence concepts: homogenization and catch-up. We also determine activities' concentration trends within each trade agreement according to different measures of agglomeration. Afterwards, we use these measures to introduce an agglomeration variable in conditional convergence regressions. The analysis of the sigma and absolute beta-convergence concludes to a divergence between the two NAFTA partners. On the contrary, we observe a process of convergence in the MERCOSUR between 1985 and 2000 even if this process appears to slow down after 1991. Our conditional estimates also show that agglomeration plays a significant and positive role in growth after the implementation of treaties

Suggested Citation

  • Nicole Madariaga & Sylvie Montout & Patrice Ollivaud, 2004. "Regional convergence, trade liberalization and agglomeration of activities: an analysis of NAFTA and MERCOSUR cases," Cahiers de la Maison des Sciences Economiques bla04069, Université Panthéon-Sorbonne (Paris 1).
    • Handle: RePEc:mse:wpsorb:bla04069
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Brida, Juan Gabriel & London, Silvia & Rojas, Mara, 2013. "Una aplicación de los árboles de expansión mínima y árboles jerárquicos al estudio de la convergencia interregional en dinámica de regímenes || An Application of Minimum Spanning Trees and Hierarchica," Revista de Métodos Cuantitativos para la Economía y la Empresa = Journal of Quantitative Methods for Economics and Business Administration, Universidad Pablo de Olavide, Department of Quantitative Methods for Economics and Business Administration, vol. 15(1), pages 3-28, June.
    2. Brida, Juan Gabriel & London, Silvia & Rojas, Mara, 2012. "Convergencia interregional en dinámica de regimenes: el caso del Mercosur [Regional convergence of dynamic of regimens: the case of Mercosur]," MPRA Paper 36863, University Library of Munich, Germany.
    3. Nicole Madariaga & Sylvie Montout & Patrice Ollivaud, 2005. "Regional convergence and agglomeration in Argentina: a spatial panel data approach," Post-Print halshs-00193304, HAL.
    4. Zhao, Jun & Serieux, John, 2020. "Economic globalization and regional income convergence: Evidence from Latin America and the Caribbean," World Development Perspectives, Elsevier, vol. 17(C).
    5. Gonzalez, German Hector & Dabus, Carlos Dario & Monterubbianesi, Pablo Daniel, 2009. "Technological Capabilities Asymmetries in Latin American and the Caribbean," MPRA Paper 19211, University Library of Munich, Germany.
    6. Paola Barrientos, 2007. "Theory, History and Evidence of Economic Convergence in Latin America," Development Research Working Paper Series 13/2007, Institute for Advanced Development Studies.
    7. Hurtado Briceño, Alberto José & Zerpa de Hurtado, Sadcidi & Mora, José U. Mora, 2021. "Economic and commercial convergence in Latin America. How are these countries doing so far?," Structural Change and Economic Dynamics, Elsevier, vol. 57(C), pages 239-250.

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    More about this item

    Keywords

    Growth; regional convergence; economic geography; trade integration;
    All these keywords.

    JEL classification:

    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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