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The Long Run Interplay Between Trade Policy and the Location of Economic Activity in Brazil Revisited

  • L. P. do C. Ferraz
  • E. A. HaddadEmail author
  • M. C. Terra
Chapter
Part of the Advances in Spatial Science book series (ADVSPATIAL)

Abstract

This paper addresses the question of whether further trade liberalization in Brazil may exert some influence on its already heterogeneous economic landscape. This is a rather relevant issue for the Brazilian economy, still one of the closest economies in the world, with huge economic disparities among its regions. The central question was motivated by an influent (and also controversial) theoretical insight brought about by Krugman and Elizondo (J Develop Econ 49: 137–150, 1996). Trough the specification of an interregional CGE model for the Brazilian economy, this paper argues that the adoption of (horizontal) liberal trade policies in Brazil, beyond traditional gains from trade, can also contribute to ameliorate regional inequality in the country, a result quite in line with Krugman and Elizondo’s predictions. In this sense, it makes the case for trade liberalization in Brazil as an additional (horizontal) public policy apparently effective in fighting regional inequality trough traditional market forces.

Keywords

Trade liberalization Spatial general equilibrium CGE models Latin America New Economic Geography 

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Copyright information

© Springer-Verlag Berlin Heidelberg 2013

Authors and Affiliations

  • L. P. do C. Ferraz
    • 1
  • E. A. Haddad
    • 2
    Email author
  • M. C. Terra
    • 1
    • 3
  1. 1.EESP/FGVSão PauloBrazil
  2. 2.Department of EconomicsUniversity of São PauloSão PauloBrazil
  3. 3.THEMA/Université de Cergy-PontoiseCergy-PontoiseFrance

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