Understanding the Benefits of Regional Integration to Trade : The Application of a Gravity Model to the Case of Central America
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The paper identifies the impact of
physical barriers to trade within Central America through
the use of an augmented and partially constrained Gravity
Model of Trade. Adjusting the Euclidian distance factor for
Central America by real average transport times, the model
quantifies the impact of poor connectivity and border
frictions on the region's internal trade as well as its
trade with external partners, such as the United States and
Europe. In addition, the authors benchmark Central
America's trade coefficients against those of a
physically integrated region by running a parallel Gravity
Model for the 15 core countries of the European Union. This
allows for the estimation of potential intra-regional and
external trade levels if Central America were to reduce
border frictions and time of travel between countries and
thus benefit from both the adjacency of each country's
neighbors and the gravitational pull of the region's
economies. The analysis is conducted for all of Central
America's trade and is also disaggregated for three
groups of products -- processed fruits and vegetables; steel
and steel products; and grains -- by both volume and value.
This differentiation tests the consistency of the results
while providing insight into the differentiation in trading
patterns and potential for these containerized, break-bulk,
and bulk products. The results of the model include a
potential doubling in intraregional exports if Central
America could achieve the adjacency and time-distance
factors of a truly integrated region. In addition, the
region's combined exports to the European Union and the
United States are projected to increase by more than a third
compared with the current level, assuming European
Union-level adjacency performance. Even more external trade
benefits would accrue by reducing the economic penalty
imposed by overland transport and border crossing inefficiencies.
Palabras clave
ADVERSE EFFECTS, AGRICULTURAL PRODUCTS, AGRICULTURE, AIR, ARTERIES, BANANAS, BARRIERS TO TRADE, BENCHMARK, BENCHMARKS, BENEFITS OF TRADE, BENEFITS OF TRADE FACILITATION, BEVERAGES, BILATERAL TRADE, BORDER CROSSING, BORDER CROSSINGS, BORDER TRADE, BOTTLENECKS, CA, CANE SUGAR, CASTINGS, CEREAL PRODUCTS, CIGARS, COMPARATIVE ADVANTAGE, COMPETITIVENESS, CONGESTION, CORN, CUSTOMS, CUSTOMS ADMINISTRATION, CUSTOMS CLEARANCE, CUSTOMS PROCEDURES, DEVELOPMENT POLICY, DRIVERS, ECONOMIC COOPERATION, ECONOMIC OUTLOOK, ECONOMIC POLICY, ECONOMIC RESEARCH, ECONOMICS, ELASTICITIES, ELASTICITY, EXOGENOUS VARIABLES, EXPORT BASKET, EXPORT BASKETS, EXPORT DIVERSIFICATION, EXPORT MARKETS, EXPORT PROCEDURES, EXPORT STRUCTURES, EXPORT VALUE, EXPORTERS, EXPORTS, EXTERNAL TRADE, FOOD EXPORTS, FOOD IMPORTS, FOOD PRICES, FOREIGN MARKETS, FREE TRADE, FREE TRADE AGREEMENT, FREE TRADE AGREEMENTS, FREE TRADE ZONES, FREIGHT, FRUIT, FRUITS, FUELS, GDP, GDP PER CAPITA, GRAINS, GRAVITY EQUATION, GRAVITY MODEL, GRAVITY MODELS, GROSS DOMESTIC PRODUCT, GROWTH RATE, HAZARD, IMPERFECT COMPETITION, IMPORT MARKETS, INTERNATIONAL TRADE, INTRAREGIONAL TRADE, MAIZE, MARKET SIZE, MARKET SIZE EFFECTS, METAL PRODUCTS, OPENNESS, OPTIMIZATION, PACKAGING, PALM OIL, PATTERNS OF TRADE, POSITIVE EFFECTS, PROCESSED FOODS, PRODUCTIVITY GROWTH, RAIL, RAIL SERVICES, RAILWAY, REGIONAL INTEGRATION, REGIONAL TRADE, REGIONAL TRADE INTEGRATION, RICE, ROAD, ROAD CONDITIONS, ROAD HAULAGE, ROAD QUALITY, ROADS, ROUTE, ROUTES, RUBBER, SEAFOOD, SPEEDS, STEEL, STEEL BARS, STEEL PRODUCTS, STRUCTURAL CHANGE, TARIFF BARRIERS, TECHNOLOGY TRANSFER, TRADE AGREEMENT, TRADE BARRIERS, TRADE DETERMINANTS, TRADE FACILITATION, TRADE FLOWS, TRADE IMPEDIMENTS, TRADE LIBERALIZATION, TRADE MODEL, TRADE MORE, TRADE OPENNESS, TRADE PARTNERS, TRADE PATTERNS, TRADE PERFORMANCE, TRADE VARIABLES, TRADE VOLUMES, TRADE ZONE, TRADING PATTERNS, TRAFFIC, TRANSIT, TRANSPORT, TRANSPORT COSTS, TRANSPORT INFRASTRUCTURE, TRANSPORT MODES, TRANSPORT SERVICES, TRANSPORTATION, TRANSPORTATION COSTS, TRANSPORTATION SERVICES, TUBES, VEGETABLE OILS, VEGETABLES, VITAMINS, WAXES, WHEAT