Shifting Armington trade preferences: A re-examination of the Mercosur–EU negotiations |
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| Institution: | 1. Unit of Agro-Food Economics and Natural Resources, Centre for Agro-Food Research and Technology (CITA), Avenida Montañana, 930, 50059 Zaragoza, Spain;2. University Loyola Andalusia, Department of Economics, Calle Energía Solar, 1, 41014, Palmas Altas, Seville, Spain;3. Department of Agriculture and Agricultural Economics, Faculty of Veterinary Sciences, University of Zaragoza, Calle Miguel Servet, 177, 50013 Zaragoza, Spain;1. Department of Economics, Jönköping University, Sweden;2. Royal Institute of Technology (KTH), Sweden |
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| Abstract: | This paper examines the ‘small share’ problem inherent within the constant elasticity of substitution Armington specification. As a de facto research tool in the quantitative trade literature, this structural bias plagues the results of numerous multi-region CGE studies. Kuiper and van Tongeren (2006) proposed a fusion of gravity and CGE specifications to remedy said bias, which the current paper further develops. With a pervasiveness of ‘small-share’ examples on Mercosur–European Union trade owing to the latter's restrictive tariff regime, the results reveal that significant additional trade led gains to Mercosur under a potential preferential trade agreement when compared with the standard Armington treatment. |
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