Trade integration in manufacturing: the Chilean experience
Using bilateral trade flow data from 1979 to 1999, we estimate trade integration between Chile and its principal trading partners during the period (European Union, United States and Latin America). Our estimates are based on a gravity specification, theoretically grounded on a monopolistic competition framework with increasing returns. Trade barriers are measured following the border effect methodology by comparing inter-national imports to intra-national ones. Our results are consistent with the agenda of trade integration followed by Chile. Moreover, trade integration turns out to be heterogeneous across industries and over the time. We also find asymmetries between export and import oriented policies as well as between partners. All these features are usually missing when one uses direct measures of trade policies.
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