Geography, Structural Change and Economic Development

Geography, Structural Change and Economic Development

Theory and Empirics

Edited by Neri Salvadori, Pasquale Commendatore and Massimo Tamberi

The authors in this book regard the process of economic expansion as a non-homogeneous and multifaceted phenomenon which has deeply affected human welfare, and cultural, social and political change. The book is a bridge between the theorists (Rosenstein-Rodan, Lewis, Myrdal, and Hirschmann) who in the post-war period analyzed regional inequalities, structural change and dualism, and the modern literature on economic growth. The latter has emphasized the existence of multiple equilibria, bifurcations and various types of dynamic complexity, and clarified the conditions for the emergence of phenomena such as cumulative causation, path dependence and hysteresis. These are the typical ingredients of structural change, economic development or underdevelopment.

Chapter 6: South–South Regional Trade Agreements, Comparative Advantage and Industrial Growth: Evidence from MERCOSUR Countries

Alessia Lo Turco

Subjects: economics and finance, radical and feminist economics


Alessia Lo Turco 6.1. INTRODUCTION A vast number of South–South Regional Trade Agreements (RTAs) were signed during the 1990s and, as a consequence, South–South trade flows have increased substantially. This chapter sets out to provide evidence on the existence of a long-run relation between the formation of a South–South bloc and industrial growth in member countries, seeking to account for possible differential long-run effects from integration. The formation of South–South RTAs can affect countries and even sectors within countries in a different manner, with comparative advantage sectors being fostered and the remaining ones being possibly negatively affected by competition within the bloc. This holds especially for smaller partners which do not possess a major internal market size to take advantage of economic geography forces when comparative advantage is missing. This long-run nexus is specified as a cointegrating relationship between industrial output and the South–South bloc formation. The RTA is identified by the evolution of the preferential margin applied by partners in each sector. Estimation of the long-run relation is tackled by means of panel DOLS (Mark and Sul, 2003). Apart from the estimation of a homogeneous cointegrating vector for the whole group, separate cointegration relations for comparative advantage and disadvantage sectors were estimated in order to highlight whether the South–South integration has fostered specialization more than diffusion of industrial activities. Finally, empirical investigation is conducted on the MERCOSUR agreement: though some work has been done (Sanguinetti et al., 2004) on the effects of MERCOSUR...

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