Trade in intermediate goods and regional production networks. An application for Latin America

This paper quantifies the effects of two regional integration agreements in Latin America (LA), namely the Latin American Integration Association and the Southern Common Market, on the development of production networks in the region. Two main hypotheses are tested using disaggregated data for trade in goods between eleven LAIA members over the period 1991-2008. First, with integration LA countries have become more integrated into regional production networks and second, the implementation of LA agreements has production relocation consequences. The main results indicate some evidence of production networks mainly in the 1990s and for Mercosur members, but no evidence is found after 2000