Economic Integration and Unemployment in Mercosur

Abstract

JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact support@jstor.org. Your use of the JSTOR archive indicates your acceptance of the Terms & Conditions of Use, available at https://about.jstor.org/terms Abstract This paper quantifies the interdependence in labor markets that exists in the Mercosur countries. Two sets of panel data are constructed: one formed by the aggregation of annual time series data from Argentina and Brazil, and another with data from Uruguay and Paraguay. These two sets of data are used to estimate a Var model that includes the following variables: economic growth, real effective exchange rates, and unemployment rates. Another Var is estimated including the change in the wage levels in place of the unemployment rates. The results indicate that strong cross border effects ensue between countries such that national unemployment rates drop in response to shocks of economic growth and devaluation in other member countries. The paper ends with a series of recommendations on the design of regional stabilization policies. • JEL Classiflcation:F15, F42 •