Mercosur and the spillover effect on trade creation

Abstract

This paper analyzes whether export experience within Mercosur affects the likelihood of market creation for new non-marketed products, i.e. a spillover effect for third countries. Using a highly disaggregated database (BACI-HS4) and an estimation strategy based on probabilistic models, it is found that previous export experiences are associated with a 1.9% market-creation probability for new products. This effect, coupled with the results of Figueiredo & Loures (2016), indicates that Mercosur not only contributes to the expansion of the extensive trade margin within the bloc, but also constitutes a first step for a product to consolidate itself in the exploration of new international markets.