Inter‐provincial trade in Argentina: Financial flows and centralism

Abstract

AbstractThis paper is part of a broader agenda and constitutes a first step to empirically understand the main determinants of the interprovincial trade in Argentina. We use a novel database of regional trade among the 24 Argentinean subnational jurisdictions for 2017. Using a structural gravity model and novel econometric techniques, we analyze the variables influencing trade between the provinces. In addition to the traditional variables of the canonical gravity model, we add some variables of interest that can affect trade between subnational jurisdictions. With a special focus on financial flows, we analyze the impact of the fiscal federalism (redistributive transfers known as coparticipation), income distribution, and household payment methods, among other variables that may be correlated with formal trade. Additionally, we analyze the potential impact of trade concentration in the autonomous City of Buenos Aires (CABA) and Buenos Aires. Interprovincial trade flows are analyzed, considering both origin and destination provinces. The results indicate that coparticipation flows are an important determinant of interprovincial trade, generating relevant (and negative in the origin) spillover effects between the provinces. Also, the high economic and social concentration in CABA and Buenos Aires discourages interprovincial trade.