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This paper presents a structural ex-ante model to study the trade creation and trade diversion effects associated with a country's accession to a Customs Union. The model extends previous studies by introducing explicitly product differentiation and exports in the determination of trade creation and trade diversion. The model is then applied to Portugal's accession to the EC. Estimates of elasticities of substitution for 26 sectors lead to a classification of trade creation and trade diversion at the sectoral level.
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Corado, Cristina and Melo, Jaime de, An Ex-Ante Model for Estimating the Impact of Trade Flows of a Country's Acession to a Costum Union (October, 1983). FEUNL Working Paper Series No. 8
